Indian IT & Electronics Sector is suffering

‘Make in India’ will remain a dream if the difficulties of manufacturers’ did not reduce, according to MAIT. The Indian IT and electronics sector is in distress. MAIT Study has analysed IT Hardware manufacturing sector (PCs, servers and laptops) and its challenges in Make in India scenario.

Indian IT and electronics sector is bearing a loss of 15.87% owing to tax policy, import structure, logistics and other factors.

Comparison with China

  • In India there are lots of issues which create hurdles for manufacturers but China has a mature ESDM ecosystem. Country provides better environment in terms of ease of doing business.
  • The registration takes 29 days & costs 3.6% of the property value in China. In India, it takes 44 days and cost 7% of the property value.
  • More number of taxes, more number of interactions & tax collecting. In China total of 7 payments are required while in India number of payments are 33.
  • China cost to export/import is almost half of that in India. For eg, total logistic related cost amounts to USD 235 per container in China, while it amounts to USD 625 per container in India.

What’s the solution?

MAIT has suggested several solutions, which could be placed on table to address. Differential excise duty, forced imports and high cost are some of the disadvantages that need to be tackled. And these problems can be solved once the manufacturing ecosystem changes. This is not easy, but MAIT with several other companies is trying to push the talk with Government. They have recommended mainly three issues to change viz., duty differential scheme, zero import structure and less challenging export infrastructure.

Talking about duty differential scheme, Nitin Kunkolienker said, “to promote manufacturing in India, concessional rate of excise duty of 2% and on finished goods rate of 12.5% should be given, it will be for good enough time to create a base, we are not demanding this benefit for life time, after creating a base for manufacturers Govt. can gradually withdraw it.”

What’s next?

Once suggestions are in working, we can see phases of growth. These will be –

Phase 1: Once duty differential schemes is on, it can increase the capacity utilisation of installed capacities of factory.

Phase 2: after phase 1 is done, it will automatically attract component builders for establishing base. This will lead to increase in raising efficiency and productivity, raising capital of supply chain.

Talking about suggestions that MAIT has recommended to Govt. Krishna Kumar of Dell said “The ability of the Government of India to address some of the controllable factors such as tax rates will make manufacturing in India more competitive. This will increase the capacity utilisation of existing players and also attract investments from other players, who are currently importing their products into India and not manufacturing locally. This strategy has already shown results in the case of smart phone and Tablet vendors, and serves as a strong signal that the PC industry has the potential to go the same way,”.

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