PLI Scheme & Electronics
By Dhurjati Mukherjee
The quest for self-reliance has gained momentum in recent years, specially since the announcement of ‘Make in India’ programme. This no doubt is an important step of the government but though India’s post-independence development strategy has been woven on rapid industrialisation, most industries were given significant trade safeguards so that their growth was not hampered by competition from more established foreign producers. The private sector from the outset remained confined to non-core sectors in a protected market, ceding state-run core sector growth.
With India having missed out on the ‘third industrial revolution’ comprising electronic goods, micro-processors, personal computers, mobile phones etc., the present situation demands that Indian manufacturers are having to become globally competitive, though quite late in the day. Undoubtedly, the country needs to attract foreign technology as well as foreign direct investment. Obviously, if we are to manufacture on a global scale, then ‘Make in India’ products would need global shelf space. In this connection, the recently announced production linked incentive of Rs 76,000 crore as announced by the Union Cabinet is definitely a big boost for chip makers. The programmeis to ‘usher in a new era in electronics manufacturing by providing a globally competitive incentive package’ to companies in semiconductors and display manufacturing as well as design. This, is said, shall pave the way for India’s technological leadership in these areas of strategic importance and economic self-reliance.
Importantly, the incentive package it is intended to attract global players engaged in silicon semiconductor fabs, compound semiconductors, silicon photonics, sensor fabs, semiconductor packaging and semiconductor design. The scheme for setting up of semiconductor fabs and display fabs will extend fiscal support of up to 50 percent of project cost. The funds will be utilised to develop the IT Ministry’s Semi-Conductor Laboratory (SCL) at Mohali through a joint venture. Besides fiscal support, up to 30 percent will be provided to set up at least 15 units making compound semiconductors and semiconductor packaging. The scheme will cover compound semiconductors/silicon photonics/sensors fabs and semiconductors ATMP/OSAT facilities.
Finally, what is most significant is the announcement of setting up of an India Semiconductor Mission which is expected to be a nodal agency for implementation of the schemes on semiconductors and display ecosystem. Already parleys are on with European Union, the United Kingdom, Canada and Australia in this regard. A key policy challenge lies in enabling consistency in respect of critical sub-components on a par with other ‘ease of doing business’ parameters, specially for PLI based production.
These schemes being contemplated for large electronic manufacturing and IT hardware is expected to India forward. In the long term, the semiconductor industry will make advanced communication technologies like 5G, scaled up Internet of Things (IoT) and Industry 4.0more accessible and affordable. Experts are of the opinion that it will spur innovation in upcoming technologies like quantum computing, health electronics. Electricity storage systems and next gen mobility. Also, to reduce the carbon intensity of the economy and facilitate the shift to RE, the availability of semiconductors will play a key role.
It is significant that the government is determined to make Indian industry effective as Prime Minister Modi recently suggested that five companies in every sector should be part of top global companies. As per an official statement after a pre-Budget consultation, the corporate sector should invest more in areas such as agriculture and food processing as well as electronics. To boost the private sector, he spoke about the focus of the government towards reducing the compliance burden to enable the emergence of Indian companies on a global level.
Not just the electronics and IT sector, the thrust towards self-reliance is manifest in the defence sector as well. In fact, Defence Minister Rajnath Singh recently stated at the annual general meeting of FICCI that India has conveyed to friendly nations such as the United States, Russia and France that weapon systems and platforms required by Indian armed forces will have to be manufactured in the country.
Voicing the government’s aim to make India a global defence production hub and self-reliant in military requirements, Singh said it was agreed during talks with the French Defence Minister that a major French company will produce an engine in India by joining hands with an Indian company. According to Singh the worth of India’s defence and aerospace manufacturing market would increase to Rs 1 lakh crore by next year from the present Rs 85,000 crore, out of which the country will not only achieve its export target of Rs 35,000 crore by 2024 but will also become a net exporter of defence equipment.
The efforts of the government are, no doubt, commendable but the question arises whether the private sector would come forward to make these plans successful. As is well known, the spending of the country’s private sector towards R&D is very meagre, much less than the emerging economies. Even that of the government’s spending in this sector is poor, there are expectations that more resources would be allocated to make products and systems globally competitive in India’s bid for self-reliance. At this juncture, State funded R&D, including basic research, by PSUs and research institutions and universities need to be scaled up significantly, well above the dismal one percent of GDP currently. Private sector delivery-oriented research could also be supported, linked to meaningful participation in manufacturing at appropriate levels in the supply chain.
Innovation holds the key and not just incentives but the thrust needs to be on research and active collaboration with technical institutes and the universities in the regard. One may mention here that information technology spending is expected to reach a total of $93 billion in 2021, an increase of 7.3 percent from 2020, according to global research firm, Gartner and this is projected to further grow to $98.5 billion in 2022. However, experts believe that with the new incentives, it would not be a surprise if the figure crosses $100 billion by 2022-end.
It becomes evident that India’s sincerity in attaining self-reliance has taken shape only in recent years though political leaders have been taking about this since decades. The success of ‘Átmanirbhar Bharat’needs to become a reality as for an emerging economy like India, this is the key to attaining credibility on the global front. But a lot depends on the initiative and enterprise of the private sector and how far it can bring in the right technologies to manufacture quality products and achieve economies of scale.
However, the challenge is indeed quite tough as countries such as South Korea, China and Japan are way ahead, specially in the electronics and IT sector. Only effective collaboration and local manufacturing hold the key to success. Moreso, as it is doable given the huge domestic market in the country may lure foreign tech companies to come to India and with latest technologies. The right balance is the key to success. — INFA