India has an opportunity to cash in on global companies'
efforts to build factories outside China, the new World Bank
president said on Wednesday, as firms seek to diversify
their supply chains.
His comments follow recent investment announcements by U.S.
firms, including chipmaker Micron Technology, in India and
come as the United States looks for a strong counterweight
to China in Asia amid growing tensions in ties.
In recent years, many companies have adopted a "China Plus
One" strategy to build new manufacturing units outside the
People's Republic.
India has a window of three-to-five years to seize this
opportunity to attract investment, said Ajay Banga, the
former Mastercard CEO who became World Bank chief last
month.
"I think India's opportunity currently is to cash in on the
'China plus one' opportunity. This opportunity won't stay
open for 10 years," Banga told reporters in New Delhi during
his first official visit to the country.
Indian Prime Minister Narendra Modi had his first state
visit to the United States last month, which coincided with
a flurry of investment announcements by U.S. companies in
India.
Banga also said that India's growth has been cushioned by
domestic consumption in the face of a global slowdown.
The World Bank chief also called for private capital
investments to aid global efforts for renewable energy
funding. The lender estimates that $1 trillion will be
required by 2030 in developing nations for green energy
transition to help achieve net-zero targets.
"The facts remains we will need different forms of
concessional capital. We will also need different forms of
multilateral bank capital and government capital and
philanthropy capital to take first risk positions or help
enable the blended finance to come through," Banga said.
(Reporting by Nikunj Ohri; Writing by Shivam Patel; Editing
by Sharon Singleton)
The Electronics Sector in India
The Indian electronics industry is one of the most rapidly
growing industries worldwide. Electronic products have
continuously impacted and shaped our lifestyles in the
current digital era. The advent of technology has led to
seamless activities and accelerated the digital revolution
to the next level. Furthermore, demand for electronic
devices is anticipated to rise steadily and continue to be a
key economic driver worldwide.
The
global electronics industry was estimated at US$ 2.9
trillion in 2020. The Indian government has widely
recognised the strategic importance and growth potential
of this industry in its National Policy for Electronics
(NPE) 2019. NPE was unveiled with a vision to make the
country a comprehensive hub for Electronics System Design
and Manufacturing (ESDM) by developing a supportive
environment for the industry to compete with global peers.
Moreover, the ESDM industry is one of the top 25 priority
sectors in the government's Make in India initiative;
therefore, it is a crucial contributor to economic growth.
Indian policymakers have put great emphasis on developing
sustainable manufacturing and exports of electronic
devices. Overall, electronics manufacturing saw
exponential growth to reach US$ 67.3 billion in 2020-21
from US$ 37.1 billion in 2015-16. However, the COVID-19
pandemic caused serious disruptions across the globe, but
the industry has shown strong signs of recovery.
India's Long-term Vision
Make in India for the world
Make India the number one exporter and manufacturer of
electronics
Become a substantial player in the global value chain
Build a comprehensive ecosystem of more than US$ 1 trillion in
the next decade for mobile phones, consumer electronics and IT
hardware
India's Short-term Vision
The government aims to make electronics one of the top three
export categories by 2025-26. A US$ 1 trillion digital economy
target is projected to boost demand for electronics, which may
stand at around US$ 180 billion by 2025-26. If India can
accomplish the manufacturing goal of US$ 300 billion for
electronics, the local market requirement may be fully met by
such manufacturing. The US$ 300 billion target also requires
US$ 120 billion of exports in the global market. Global
competitiveness with optimum scale would be pivotal in
achieving the aforesaid targets. Adequate fiscal measures,
along with policy measures, would help in meeting the
objectives of NPE 2019
Growing Focus on Electronics Exports
The Electronics Manufacturing Services (EMS) industry is
rapidly advancing, and prominent global leaders and domestic
companies see India as an emerging manufacturing and
operations hub. A strong component manufacturing foundation is
necessary for a sustainable ESDM environment. This segment
requires very high operating efficiency to stay profitable.
Moreover, the availability of components and an effective
supply chain are essential for EMS companies to grow. India,
with its strong demographics and skilled employees, has the
potential to be one of the leading exporters of electronics in
the world. The government is highly focused on reaching the
US$ 300 billion electronics production target by 2026.
Moreover, the government has emphasised boosting its domestic
manufacturing ecosystem to help India be able to withstand
supply chain disruptions. The country aims to gain renown as a
trusted and reliable partner in the global value chain.
India has clearly drafted its ambition to achieve US$ 120
billion worth of exports by 2026. The electronics sector’s
journey has been very interesting. For instance, in 2014,
India was highly focused on electronics import.
Systematically, the Prime Minister of India, Mr. Narendra
Modi, has strengthened the electronics sector over the past
few years..
The world relies heavily on China for its supply chains and
access to strategic resources. Whilst the geopolitical risk
may be increasing, a complete decoupling is still
undesirable for most companies. Faced with mounting pressure
to diversify out of China, many foreign companies are
therefore exploring alternative de-risking strategies to
help with effective supply chain diversification and
key-asset distribution.
Over the past two years, foreign companies have experienced
increasing difficulties in doing business in China due to
stringent policies, such as the zero tolerance on COVID and
China’s stronger inwards focus and push for
self-sufficiency. Asset exposure, supply chain disruption
and logistics are among the most critical areas impacted by
a changing political and business environment.
These factors, and the perception that geopolitical risk has
increased in general, have hastened many foreign businesses
to re-assess the scale and nature of their China operations
and to consider options for diversification away from
China. To face the increasing risk and to find the right
position in the Chinese economic eco-system, it is key for
international players to understand the underlying political
and economic drivers.
