India’s $500 billion electronics goal: A dream too far?

India's domestic electronics industry may clock a total revenue of just $145 billion this year, the consensus estimate of three market researchers showed. This includes the consumer electronics industry of smartphones ($42 billion); laptops, desktops and tablets ($11 billion); and televisions, cameras, audio and accessories ($12 billion). Home appliances are expected to add $80 billion.

In September, Prime Minister Narendra Modi called for achieving a $500 billion electronics economy by 2030; however, this requires an annual revenue growth of 23%, against the 5% or lower growth in every electronics category since the pandemic outbreak.

“The current consumer markets show no signs of a turnaround, and enterprises are cautious due to macroeconomic concerns," said an industry executive who works with the Centre on various technology policy affairs. "Overall, India’s growth pace in the electronics economy has largely remained in the low single digit. To reach the promised land of a $500-billion domestic electronics economy, India will need strong double-digit growth—which is currently entirely lacking in the market," the executive said on the condition of anonymity.

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A key reason is India's flatlining smartphone purchases. This is crucial, since smartphones account for nearly 65% of India's entire consumer electronics economy, and 30% of the overall electronics economy. With no visible growth factors, the only hope lies in increasing the domestic value addition in devices, which will then generate additional revenue in the market even amid stagnant consumer sentiment.

“A recent CII estimate said that India could export electronics worth $60 billion by 2030. Even then, you’d need the technology markets to grow at 20% each year—which is unlikely even with the premiumization trend that you see today. Overall market saturation, lack of first-time buyers, and narrow growth scopes mean that achieving such a target could be unlikely," a senior technology consultant said.

The industry's concerns remain despite the Union electronics ministry considering a $3-billion incentives package to encourage electronics components manufacturing, intellectual property design and creation of homegrown brands. India’s semiconductor manufacturing push is also expected to contribute to the $500-billion target.

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Emailed queries to the Ministry of Electronics and Information Technology remained unanswered till the time of publishing.

Ajai Chowdhry, an industry veteran and co-founder of HCL, said the electronics economy is lagging in value creation. “If you look at most of the electronics sectors, global brands that rule the Indian markets take most of the economic benefits back to their home nations, namely China and the US. If such an economy is allowed to continue, India will fail to generate value even on the back of net market revenue growth," he said.

"To do this, immediate action to create brands in strategic industries, as well as building a conducive market for private companies to develop patents and IPs in the country, will be key—else we’ll clearly fall short of the lofty revenue targets that we’ve set for ourselves," Chowdhry said.

Ashok Chandak, president of India Electronics and Semiconductor Association, concurred. “In our assessment, we’re counting aspects such as the local manufacturing of electronics sub-system components supplied to the automotive industry of India, which in turn will combine with the electronics and appliances markets to create around $400 billion in net industry revenue in the next six years. But, doing this successfully will also depend on in-progress localization policies, a successful import duty revision, rolling out design-linked incentives, and encouraging local brands in markets that are not saturated and matured yet," Chandak added.

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Without these added fillips, India's electronics industry, including exports, is likely to reach $250-300 billion, considerably short of target.

Industry experts said this puts considerable focus on the importance of policies, since there are no other substitutes. Navkendar Singh, associate vice-president at market researcher International Data Corp. (IDC) India, said, “There is no organic growth in the domestic smartphones market, and there are no signs that there will be a sudden revival in the coming years, either. 5G has not been a compelling growth factor, and there’s little to suggest that there could be any growth in this segment beyond a single-digit annual growth in value, at least in the near term."

Emails on growth expectations sent to Samsung, Xiaomi, Vivo and Oppo, India’s top four smartphone brands that account for over half the market, remained unanswered.

Other electronics and appliances brands have expressed optimism. Last month, Sunil Nayyar, managing director of Sony India, said the company is likely to continue seeing double-digit growth in near future. Separately, Nilesh Gupta, managing director of multi-brand pan-India electronics retailer Vijay Sales, said consumer demand for electronics is seeing an uptick driven by lucrative exchange and zero-interest financing options.

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Most key components in gadgets and appliances, however, continue to be imported.

“We’re pushing for our semiconductor ecosystem to start firing significantly by 2027-28, and talks for technology transfer joint ventures between global and domestic firms are currently ongoing in the components industry. With the right policies and incentives, which the Centre is already working on, revenue generation should see a clear boost in the next three years," a senior government official added, requesting anonymity.

For now, though, the electronics economy’s targets remain a work in progress, quite some distance off its goal.