Robust strategy for growth of electronics mfg value chain not possible without China CDS

New Delhi, Jul 23 (PTI) China cannot be ignored when India is looking to build a robust strategy to grow in the global value chain for electronics manufacturing, Centre for Development Studies Director Professor C Veeramani said on Wednesday.
    While launching a study in collaboration with mobile industry body ICEA, Veeramani said that policies in India must focus on export-led growth in electronics manufacturing because the major market and scale of purchasing power is higher outside the country.
    "China is the leader in the industry, which is going to remain a leading industry. We cannot have a robust strategy keeping China out. That will not work. If we have to get into this (export-led) kind of strategy, China has to be part of the game," he said.
    Veeramani said that there is a need for change in mindset. "If Chinese have an interest or a stake in the Indian market, then we will not foresee any problem of the kind that you are foreseeing (restriction on components supply, capital goods by China). If we allow FDI and Chinese companies to come here and play an important role here, it is a win-win."
    Recently, domestic electronics manufacturing services company Dixon Technologies formed two joint ventures with Chinese companies for electronic components.
    The CDS study on "Gains from Mobile Phone Manufacturing in India through Backwards-Linked Participation in Global Value Chains..." shows that Mobile phone exports surged from just USD 0.2 billion in 2017-18 to USD 24.1 billion in 2024- 25, driven primarily by large-scale export production.
    "Exports now outpace domestic demand and are the primary driver of production growth. The country has been recording a robust positive net export trend in mobile phones since 2018-19," the study said.
    The study used the Annual Survey of Industries (ASI) to estimate that DVA (domestic value addition) in mobile phones made in India has increased to over USD 10 billion by 2022-23.
    "Direct DVA, according to the Study, increased from USD 1.2 billion (2016-17 to 2018-19) to USD 4.6 billion (2019-20 to 2022-23) – a 283 per cent rise. Indirect DVA rose by a much higher percentage, from USD 470 million to USD 3.3 billion – a 604 per cent leap. Indirect DVA refers to the backward linkages of the mobile phone industry – that is, the value added by domestic suppliers of components and services used in production," the study said.
    According to ASI data, the total employment (combining direct and indirect) associated with mobile phone production has grown significantly to more than 17 lakhs in 2022-23.
    According to the CDS analysis, jobs linked to exporting of mobile phones surged by over 33 times.
    Veeramani called for easing rules based on "country of origin" as products that are part of the global value chain find it very difficult to satisfy the rules of origin requirement.
     "The problem with India in international trade is that we are everywhere, but we play a very small role. Our scale is our major issue. Our scale is small. We need to expand the scale across value chains, across different segments and products within electronics. We have to get the leading firms into the country," he said.
    Veeramani said that once the lead firms come into the country then they will use India as the base for manufacturing for the world market, not for the Indian market.
    "The understanding that the Indian market is big needs to change. The Indian market is not actually big. We account for 18 per cent of the world's population, but we account for only 3.5 per cent of the world's GDP. The large market that exists outside India needs to be tapped. For that, we need the leading firms in the country in electronics to come to India to manufacture for the world market," he said.
    Veeramani said that even American companies, Japanese companies operating in India also depend on the Chinese for key raw materials and intermediary imports.
    "China plays a key role in the GVC (global value chain). They account for about 25 per cent or more of total parts and components in this sector. When they account for such a large share of parts and components exports and production in the world, we cannot keep China out of this game," Veeramani said.
    The government has introduced trusted source rules which tacitly restrict sourcing of products from China.
    Earlier this month, India Cellular and Electronics Association Chairman Pankaj Mohindroo had written to Union Minister for Electronics and IT, Ashwini Vaishnaw, that China has started imposing restrictions informally on supplies of components and capital goods to India, which has a significant impact on the country's electronic production.
    He said that the sanctions from China on India have been carefully calibrated and sequential, starting with restrictions on capital equipment exports from China, followed by restrictions on Rare Earths and now Chinese technical expertise.
    Mohindroo said that while domestic production remains relatively insulated for now, export-linked manufacturing to the tune of USD 24 billion in FY25, projected to cross USD 32 billion in FY’26 in smartphones, has now come under serious risk.

(This story has not been edited by THE WEEK and is auto-generated from PTI)