FDI Entry In India Increasing With The Electronic Exports Making It A Hub

07 December 2023

The rise of India as a hub for manufacturing electronics is in an upward position and the electronics exports have also increased from the country this year. Currently, the electronics sector of India stands at a value of $155 billion, with 65% accounting for domestic production. Electronics exports come under the top 5 exported commodities by India, with a 5.8% share value in 2022.

 

Initiatives such as “Digital India”, “Make In India”, and “Smart City” is paving the way for India to be a top preferred destination for electronics manufacturing. China has been an electronic hub for many countries, including the USA, but India might replace China as the preferential electronic hub with the rise of exports and foreign direct investment.

 

India’s Electronics Export — An Overview

 

The Indian electronics market has encountered a gradual growth in recent years. The market has been quite sluggish in terms of the growth of its exports as compared to the imports. The data below represents a comparison of India’s electronics imports and exports in the past 10 years.

 

Tracing the values of imports and exports for electronics from India, the imports rose till 2017 and declined in 2019 with a sudden increase in the year 2020 (due to the pandemic), following an increase in the imports again in 2021. However, the imports registered the lowest-ever values in 2022.

 

On the other hand, the exports of electronics from India increased sluggishly with 2015 recording a decline, followed by surges till 2019. The year 2020 registered a slowdown in the exports of electronics from India (due to the pandemic), but increased imports stood parallel to the exports.

 

Observing the electronics trade data, the gap between the values of imports and exports for electronics from India has gotten narrower over time. In 2018, the imports decreased by 3.37% and the exports increased by a whopping 34.94%. In 2022, the gap has narrowed further, making the value of exports and imports stand nearby in the same range.

 

 

The demand for India’s electronics has been increasing, and domestic manufacturing has been also going up. The domestic production of electronics shows mobile phones covering 43% of the sector, IT hardware covering 5%, consumer electronics 12%, LED lighting products 3%, electronics components covering an 11% share, auto electronics 8% and industrial electronics a 12% share.

 

The dataset shown below provides an overview of the top 5 demanded electronics from other countries to be supplied by India in the year 2022. The top 5 electronics exports include—Phones ($10.9M), Transformers ($2.6M), Cables ($1.7M), Motors Parts ($1.2M), and Fuses, Plugs, etc. ($1M).

 

 

 

India’s Electronics Export — Top Partners

 

Over time, India’s position as a reputable electronics manufacturer has increased in the global market. The rising per capita disposable income and private consumption have resulted in India becoming one of the fastest-growing electronics markets in the world.

 

The consumer electronics market in India is in a lucrative position which has drawn many investment opportunities as foreign direct investment and mergers and acquisitions by one of the top business players in the international market of electronics.

 

These investments are increasing the scope of electronics manufacturing in India, with rising exports shortly. As witnessed earlier in the dataset above, the gap between the imports and exports of electronics from India have grown narrower, falling short only by a difference of $3 billion in 2022.

 

For the year 2022, the top 10 exporting partners for India’s electronics exports are the USA (20.3%), the UAE (13.1%), the Netherlands (5.4%), the UK (4.9%), Germany (4.7%), Italy (3.7%), France (3.1%), Austria (2.5%), China (2.4%), and the Czech Republic (2.2%).

 

 

 

The Exports of Electronics Following 2020

 

The pandemic was a challenging time for the majority of the top electronics manufacturers. The supply fell short due to the restricted trading activities and demand grew even more with the emergence of working-from-home conduct, adopted by many countries and their corporations.

 

With the introduction of initiatives like “Make In India” and “Digital India”, the potential of India’s domestic manufacturing has grown significantly. Even when the exports declined in 2020 and imports increased due to the pandemic, the gradual stepping up of electronics exports continued.

 

In the dataset below, the exports of electronics from India following the first quarter of 2020 till the second quarter of the ongoing fiscal year have gone through fluctuations but grew significantly higher than the value of exports registered during the year 2020 as seen in the table below.

 

From an overall point of view, India’s electronics export growth has achieved an upward trend following the positive growth in the domestic electronics manufacturing sector in the year 2021. The exports of electronics from India have increased in 2022 and are showing positive signs for 2023.

 

 

 

What Is The Current Status of India’s Market?

 

The electronics market of India is valued at $155 billion in the ongoing year. The domestic production of electronic products and components in India accounted for a share of 65%. The domestic electronics demand has increased in recent years, encompassing all classes.

 

Factors that contributed to the boost of domestic demand include the availability of internet connectivity and financial services such as buy-now-pay-later and no-cost EMI. The worth of domestic electronics manufacturers will touch nearly $300 billion by the end of the year 2026.

 

The exports of electronics from India have been increasing in the recent monthly trends of 2023. The value of exports amounted to $5.6 billion in January, $2.2 billion in February, $3.2 billion in March, $2.5 billion in April, $2.8 billion in May, $2.8 billion in June, and $2.4 billion in July.

 

 

The stature of India as a country with an increasing transformation of Electronics System Design and Manufacturing (ESDM) has increased in recent years. The countries around the world are starting to associate with India to develop manufacturing units for electronics.

 

China has always been the top-producing country in the world for manufacturing electronics. The stature of China has always attracted large numbers of organizations and manufacturers to establish their bases in China and grow their business while generating a handsome profit.

 

The emergence of India’s rise in stature above China, and rising geopolitical tensions of different countries with China have allowed India to be recognized as the hub for electronics manufacturing. Several foreign direct investments and initiatives by Indian companies have been only escalating India’s potential in electronics manufacturing and will continue to do so.