Electronic And Computer Software Industry and Export
INTRODUCTION
India, considered a popular manufacturing hub, has grown its domestic electronics production from US$ 29 billion in 2014-15 to US$ 67 billion in 2020-21. The electronics sector of India contributes around 3.4% of the country's Gross Domestic Product (GDP). The government has committed nearly US$ 17 billion over the next six years across four PLI Schemes: Semiconductor and Design, Smartphones, IT Hardware and Components.
Recently, the Ministry of Electronics & Information Technology released the second volume of the Vision document on Electronics Manufacturing in India, which stated that the electronics manufacturing industry will grow from the current US$ 75 billion in 2020-21 to US$ 300 billion by 2025-26. The major products that are expected to drive growth in India's electronics manufacturing are mobile phones, IT hardware (laptops, tablets), consumer electronics (TV and audio), industrial electronics, auto electronics, electronic components, LED lighting, strategic electronics, printed circuit board assembly (PCBA), wearables and hearables, and telecom equipment. Mobile manufacturing is expected to cross US$ 100 billion in annual production growth from the current US$ 30 billion by accounting for nearly 40% of the industry growth.
The IT sector in India is one of the largest contributors with a 9% contribution to GDP. The industry is around US$ 194 billion and is expected to surpass US$ 300-350 billion by 2025. India's IT industries and companies are majorly located in the southern regions such as Bangalore, Hyderabad, Chennai, Visakhapatnam, Trivandrum, Mysore, Mangalore, Kochi, etc. The country's major information technology hubs are Mumbai, Pune, Delhi, etc.
EXPORT TREND
India is among the largest IT and BPM services exporting countries and accounts for about 56% of the global outsourcing market. India’s exports of software services (excluding exports through commercial presence) are estimated to have increased by 17.2% to US$ 156.7 billion during FY 2021-22. BPO services accounted for nearly 84% of exports of information technology (IT) enabled services. Business process management (BPM) exports are valued at US$ 34 billion, growing 2.3% over the previous year. This growth in BPM is mainly driven by automation-led services in finance & accounts and human resources, increased adoption of robotic process automation (RPA) and analytics. BPM is also witnessing an accelerated shift to platform solutions.
Over the last few years, engineering research and development (ER&D) services have recorded one of the fastest export growth driven by increasing adoption of software-led products and cloudification of equipment and devices. Exports for ER&D sector are valued at US$ 31.1 billion in 2020-21. Software products witnessed 2% growth to reach US$ 3 billion, mainly driven by the rise in demand for collaborative applications, application platforms, security software, system & service management software, and content workflow & management applications.
India's export of electronic goods stood at US$ 2,009.07 million in September 2022, an increase of 71.99% YoY. Mobile phones, IT hardware (laptops, tablets), consumer electronics (TV and audio), industrial electronics and auto electronics are key export products in this sector. As per the Ministry of Electronics & IT vision, India's electronics industry exports are expected to increase to US$ 120 billion by 2026.
MAJOR EXPORT DESTINATION
The top 5 destinations for Indian electronic goods exports are: USA, UAE, China, Netherlands and Germany. USA is the largest importer of India's electronic exports followed by UAE, accounting for 18% and 17% of the overall exports, respectively. For mobile phones exports from India, South Asia, Africa and Middle East are key importing markets.
For the IT-ITeS services of India, the top 3 export destinations of India are USA, UK and EU. The country also exports these services to Asia Pacific regions, Latin Americas and Middle East Asia and sees new opportunities emerging to expand services to continental Europe, Japan, China and Africa.
As per Reserve Bank of India (RBI) statistics, software services exports to USA and Canada combined grew by 15.7% from US$ 75.1 billion in 2020-21 to US$ 86.9 billion in 2021-22, accounting the largest share at 55.5% of the overall exports. This is followed by Europe, with exports valued at US$ 48.6 billion in 2021-22. UK is the largest importer of Indian software services within EU region, accounting for 48% of exports to EU. Asia region exports of Indian software services were valued at US$ 10.2 billion, with a major share of East Asia exports valued at US$ 9 billion.
GOVERNMENT INITIATIVES
With the growing need for electronic goods, the Ministry of Electronics and Information Technology (MeitY) has implemented several production-linked incentives (PLI) to improve electronics production of India. The government has launched schemes such as the Manufacturing of Electronic Components and Semiconductors (SPECS), Modified Electronic Manufacturing Clusters (EMC 2.0), etc., to promote the country's electronic goods industry.
To further develop and increase the market share of the Indian BPO industry, the Government of India has implemented schemes such as Northeast BPO Promotion Scheme (NEBPC) and India BPO Promotion Scheme (IBPS).
a) Software Technology Parks of India (STPI) Scheme
An autonomous society under Ministry of Electronics and Information Technology is implementing STPI scheme, which is a 100% export-oriented scheme for developing and exporting computer software, including exporting professional services using communication links or physical media.
Apart from the above-mentioned specific schemes, the Government of India has taken several measures to offset infrastructural inefficiencies and associated costs to provide exporters a level playing field. Some of these can be mentioned as below.
b) Remission of Duties and taxes on Exported Products (RoDTEP)
Under this scheme, goods and products exporters are granted freely transferable duty credit scrips on realized FOB value of exports in free foreign exchange at a specified rate. Such duty credit scrips can be used to pay basic custom duties for importing inputs or goods.
c) Service Export from India Scheme (SEIS)
The government initiated this scheme to offer service providers freely transferable duty credit scrip at 5% to 7% of net foreign exchange earned through exports.
d) Duty Exemption & Remission Schemes
These schemes enable duty free import of inputs for export production with export obligation. These schemes consist of Advance Authorization Scheme, Duty Free Import Authorization (DFIA) Scheme, Interest Equalization Scheme (IES), Zero duty EPCG scheme, Post Export EPCG Duty Credit Scrip Scheme, etc.
GOVERNMENT BODY
Ministry of Electronics and Information Technology (MeitY)
Founded in 1991, MeitY is the apex body governing India's electronics and information technology industry. The functions of the ministry are promoting e-governance and India's role in internet governance, tending to policy matters, interacting about IT-related matters with international bodies and promoting the industry in India through various schemes and initiatives.
RELATED SITES
Source: India Brand Equity Foundation
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