India Requires Bold Changes to Catch Up With China

Tanmay Batabyal

Head - Marketing, Niral Networks

How does India compare to other countries in terms of the indigenisation of products and driving local manufacturing in the digital infrastructure space?

India’s efforts toward indigenisation and local manufacturing in the digital infrastructure space have been significant in recent years. The government’s Make in India initiative aims to boost domestic manufacturing and reduce dependence on imports in various sectors, including digital infrastructure. However, India still has a long way to go in terms of indigenisation and local manufacturing in the digital infrastructure space. Countries like China and South Korea have established themselves as leading manufacturers in the sector, and their companies dominate the global market.

What about the country’s recent push towards becoming self-reliant in hardware manufacturing, especially in the telecom sector?

India’s efforts toward becoming self-reliant in communications and connectivity equipment and devices are aimed at reducing the country’s dependence on imports, creating local employment opportunities, and boosting the growth of the manufacturing sector.

The government has introduced various policies and initiatives to promote domestic manufacturing. The Production-linked Incentive or PLI scheme for the telecom and networking equipment sector was introduced in 2020 to incentivise domestic production of telecom and networking products.

It has also implemented policies to promote local manufacturing of electronics, such as reducing import duties on components used in manufacturing electronic products and providing subsidies for setting up electronics manufacturing facilities in the country. These efforts have started yielding results, with several global technology companies setting up manufacturing facilities in India and increasing their local production capabilities. There has also been the emergence of several domestic players in the sector, such as Tejas Networks and Sterlite Technologies.

But is the country ignoring upstream products while focusing on downstream and last-mile products due to marketing spotlight and margins?

There could be a tendency to focus more on downstream and last-mile products, such as smartphones and routers, due to the marketing spotlight and margins associated with these products. However, it is important not to ignore upstream products, such as semiconductors and components, as they are the building blocks of downstream products. Any disruption in the supply chain of upstream products can significantly impact the production of downstream products. For example, the global shortage of semiconductors has affected the production of various electronic products, including smartphones and laptops.

India has recognized the importance of upstream products and has implemented various policies and initiatives to promote local manufacturing of components and semiconductors. For example, the government’s National Policy on Electronics aims to develop a strong ecosystem for electronics manufacturing in the country, including the development of a semiconductor fabrication industry.

So, can India catch up with China and SE Asia in this space?

Becoming a major player in the global electronics manufacturing space and catching up with China and Southeast Asia will require significant time and bold changes in India’s approach to the sector. One of the key changes required is the development of manufacturing hubs in tier-2, tier-3, and rural areas of the country. This will create economic and business hubs in these regions, reducing the burden on urban areas where the infrastructure is already overburdened. By developing manufacturing hubs in these regions, the government can also promote regional development and reduce regional disparities.

Another critical aspect is the modernization of urban infrastructure. Indian cities currently struggle with inadequate and outdated infrastructure, which is a significant challenge for the electronics manufacturing sector. The government needs to invest in modernizing infrastructure such as power, transportation, logistics, and communication systems to create a conducive environment for electronics manufacturing.

Additionally, there is a need for significant investment in technology and innovation to develop new products and manufacturing processes. The government can encourage this by providing incentives for research and development, promoting collaborations between industry and academia, and supporting technology incubators and startups. The government also needs to focus on building a skilled workforce and providing training programs to enhance the skills of the existing workforce.

Has the country missed out on anything in its approach to improving the component side of manufacturing?

India has made significant progress in improving the component side of manufacturing, but there are still some areas that could be improved further. One area where India could focus on improving is the availability of raw materials and critical components required for manufacturing. Currently, India is heavily dependent on imports for critical components, such as semiconductors and display panels, which can be a bottleneck in the manufacturing process. To address this issue, it could focus on developing a domestic supplier base for these critical components, including investments in research and development activities to improve the quality of domestically manufactured components.

Moreover, India could also focus on improving the quality standards and certification processes for domestically manufactured components. This would help build confidence among manufacturers and consumers regarding the quality and reliability of domestic products, leading to increased demand and market share for domestically manufactured components. Additionally, the country could focus on creating a favorable policy environment that encourages investments in the component manufacturing sector, including tax incentives and subsidies for companies that invest in research and development activities or set up manufacturing facilities in India.