Giving a policy push to local IT hardware manufacturing key to Digital India's success

India is the sixth largest manufacturing country in the world today. This is a reasonably impressive achievement for a country that economically liberalised itself 26 years ago. The present establishment under the leadership of our Honorable Prime minister, Narendra Modi, has taken some concrete steps to make the country an even more attractive destination for investments. ‘Make in India’ and ‘Digital India’ initiatives have generated positive sentiments in the industry. A number of brands are being driven by the prospect of a favorable environment for business and burgeoning local demand for goods, to set up manufacturing facilities in the near future. Quite a few of the world’s biggest names have already done so.

Indian Electronics & Components is one such industry which has the benefit of a growing base of consumers in its backyard. As per a MAIT analysis, there will be a demand of more than 400 million PCs and 500 million smartphones in the coming years, making India a country of great potential. The government has also taken efforts to take technology to all the Indian citizens at the grassroot level and encourage the private industry to develop the infrastructure to support this technology.

This technology infrastructure backbone is absolutely essential for ‘Digital India’. Having said that, the industry is yet to bridge the gap in terms of electronic hardware manufacturing capabilities in the country. This can be attributed to the numerous challenges like high cost of power and finance, high transactional costs, inefficient tax structure, low productivity, red tapism and poor infrastructure.

Representative image. Getty Images

Representative image. Getty Images

To address these gaps and realise the true potential of these mega initiatives, the government has to take some immediate policy decisions in two specific areas – encourage the IT hardware industry to manufacture locally and facilitate local demand by accelerating IT spending. Some of the steps below can help us achieve the goal of Net zero imports for hardware manufacturing by 2020.

Encourage the IT hardware industry to manufacture locally

Create a duty differential structure for PCs: In the past few years, we have witnessed an unprecedented growth in the smartphone market. A number of brands established and expanded their manufacturing facilities to leverage the duty differential structure put in place by the government. In a short time frame, this has played a pivotal role in the local manufacturing of affordable smartphones and, subsequently, has had a significant impact on smartphone penetration in the Indian market. This model has to be replicated for the PC industry. Not only will it open the doors for brands to set up manufacturing facilities creating jobs directly and indirectly, but it will also increase the adoption by making it affordable. A PC in every house is critical for India to realise its vision of digitisation.

Develop the component ecosystem: Manufacturing in the country today is synonymous with the assembly of hardware components. Strengthening this very component ecosystem by way of attracting component makers to Make in India will go a long way in making India an export hub. These component manufacturers are mostly small & medium enterprises and form the bedrock of the country’s manufacturing prowess. Any encouragement to this part of the ecosystem has a ripple effect on the economy. Therefore, it is critical that the government considers this as a priority and declares special incentives for component makers which in turn will enhance inclusivity, value addition and create a sustainable manufacturing habitat for IT companies.

Facilitate local demand creation by accelerating IT spending: While the intent on digitisation has been signaled in various policy statements, we often observe a lacuna when it comes to execution. Budgets allocated to IT remain unutilised due to a slow pace of procurement and inherent bureaucracy in the process. While there are provisions in the budget like online portals (GEM-government e-Market) for the purchase of IT and hardware infrastructure, it largely depends on the individual ministries and departments to utilise these funds. Lack of IT infrastructure slows down the realisation of the larger goal of digitisation significantly. For instance, there is a policy for Central Government employees where a soft loan is made available to purchase a PC. However, the policy, unfortunately, has not witnessed an upsurge due to lack of funds required to execute the same.

The need of the hour is a framework that ensures a basic minimum spending of the allocated funds within a reasonable time frame. A robust policy to accelerate the utilization of funds allocated to the IT sector has a far-reaching impact on technology infrastructure deployment.

It will be interesting to see what the Union Budget for the year 2017-18 has in store for us with factors such as demonetisation and GST playing a key role this year. There are a lot of expectations from the 'Make in India' and 'Digital India' initiatives. The budget needs to focus on how ‘Digital India’ is going to be implemented and can become deep rooted, almost a way of life, so that it can give the economy a much needed impetus. On the other hand, a clear roadmap to support ‘Make in India’ will make the country an attractive destination for businesses and will help boost the manufacturing sector, thereby adding to the GDP growth rate of the country.

(The writer is MD & CEO Lenovo India)

For full coverage of Union Budget 2017 click here.

Updated Date: Jan 30, 2017 11:29 AM

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