India recorded its worst GDP in the last nine years with a 5.3% growth during the fourth quarter. Mirroring this, the Indian electronics industry also suffered a minor slowdown but managed to record a y/y growth of 10%. The production turnover of the industry grew at a CAGR of more than 15% in the last six years and is expected to cross INR 1.5 tn by the end of fiscal year 2013.
The country ranks very low regarding electronic equipment manufacturing, at 1.5% of the total world production. According to Department of Electronics and Information Technology (DeitY), more than 50% demand for electronics in the country was met through imports and the figure is expected to rise to 75% by 2020. Government of India is undertaking several initiatives to promote domestic manufacturing of electronic equipment. Under the Draft National Policy on Electronics (NPE), the Government has targeted for creation an eco-system for a globally competitive electronic system design and manufacturing sector in the country, in order to achieve a production turnover of about USD 400 Bn by 2020. The policy also targets investment of about USD 100 Bn and employment to around 28 mn people at various levels of the industry.
All six major sub-sectors of Indian electronics industry saw growth in production turnover during the fiscal year 2012. Highest growth was recorded by the electronic components and communication equipment sub-sector, while consumer electronics was slightly subdued compared to past few years. However, rising costs of raw materials and persistent inflation was negatively affecting the profitability of the sector. Major domestic players in the industry recorded a significant decline in their profit margins during the year.
The outlook for Indian electronics is positive owing to the huge domestic demand and supply gap and double digit production growth rate in almost all of its sub-sectors. The increasing population and growing per capita income will increase the size of this industry in the years to come.
Salient Points
- In fiscal year 2012, Indian electronic industry recorded a production turnover of around USD 30 bn. The total electronic hardware production turnover of the country grew at a CAGR of 16.8% during the last six years
- The largest contribution in FY12 came from communication and broadcast equipment, which accounted for 28.3% of the total production turnover, followed by consumer electronics with 23.9%. Together these accounted for more than half of the entire production turnover of the industry
- Electronic hardware exports grew at a CAGR of 28.9% during the period 2007-12 and crossed USD 9 bn by the end of fiscal year 2012.
- During the period January 2000 to June 2012, electronics sector received foreign direct investment (FDI) of USD 1.17 bn, equal to 0.7% of the total FDI inflows in the country during that period. This was low compared with the inflows to other industrial sectors of the country. However, it grew by 19% y/y over the June 2011 figure, suggesting rising growth in inflows in this sector.
Chart: Cumulative FDI in Electronics Sector (Since January 2000 in USD Mn)
Source: Department of Industrial Policy and Promotion (DIPP)
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