An industry taskforce set up by the government to suggest ways of supporting the IT, BPO and electronics industry has warned the domestic electronic industry could miss India’s white goods boom in the absence of a significant shift in government policy.
The taskforce, set up four months ago, warned that poor infrastructure and high taxes have already restricted the Indian electronics industry to just $20 billion (Rs 92,000 crore) despite the local market reaching a size of $45 billion. As a result, $25 billion (55.6%) of electronic goods were imported into the country.
“The rapid growth in demand... clubbed with the slow rate of increase in domestic production, has resulted in an increasing demand-supply gap... This is fuelling imports, increasing the outflow of foreign exchange,” the taskforce, headed by HCL Infosystems’ chairman Ajai Chowdhry, warned in its report to IT minister A Raja on Friday.
IT and ITeS exports are expected to touch $82 billion by 2014, and $175 billion by 2020. The domestic market, estimated at $12.4 billion, is likely to touch $23 billion by 2014, according to the taskforce.
At $1.6 trillion, the electronic industry is nearly 4.4 times the size of the world oil, petrol and mineral industry and is both the biggest and the fastest growing. It is expected to reach $2 trillion by 2014, when the Indian market is expected to touch $125 billion.
The report pointed out that India’s middle-class — households earning Rs 38,000 per month or more — is swelling at the rate of 20% a year,helping the electronics market to grow 22%. Domestic production is growing at just 16%.
The taskforce warned that the import bill of electronic items could zoom from the current $25 billion to $83 billion in three-and-a-half years and to nearly $300 billion in 10 years.
This is of concern due to India’s unfavourable balance of trade position. Against anticipated total exports of around $165 billion this year, crude imports alone are expected to cost around $120 billion, if petroleum prices remain at current levels.
India is also expected to import around $180 billion of non-oil goods, leading to a total shortfall of around $135 billion in balance of payments.The taskforce blamed stringent regulations, complex administrative processes and infrastructural deficiencies for the lacklustre performance by the domestic industry. It also called for the STPI benefits — tax incentives given to small IT firms — to be made permanent.
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