India’s evolution as Electronics Manufacturing Hub

Semiconductors and displays are the foundation of modern electronics that will drive the next phase of digital transformation under Industry 4.0. Couple of favourable factors for India in this challenging industry are talented manpower and now a clarity of vision of policy framers. Indian origin engineers and scientists make upto 20 percent of global talent pool of this complex and tech-challenging industry. In terms of policy, what seems to have changed now is that there is a focused engagement of SMEs into this domain.

India recently announced the ambitious PLI scheme for semiconductor and display board production in the country and also passed approval of Rs. 2,30,000 crore to make India the global hub for electronics manufacturing (with semiconductors being the foundational building block). The initiative will assist firms engaged in silicon semiconductor companies (also known as fab), display fabs, sensor fabs, silicon photonics, semiconductor packaging & design, etc. through incentives & other provisions. Under the scheme, the cabinet cleared Rs 76,000 crore for semiconductor production and will also allow setting up of more than 20 semiconductor design, components manufacturing and display fabrication (fab) units over the next six years. Such a subsidy is expected to drastically bring down the cost of production and encourage more players across the country to set up semiconductors producing and related facilities. With several countries including the US, Taiwan, South Korea and Japan trying to leverage the opportunity created by the fast-growing global demand for semiconductors, India is also aiming to grab a slice of the $500-billion business (2021-22).

Domestic semiconductor consumption has been consistently growing at a healthy rate and need of the hour is accelerated progress on setting up chip manufacturing companies. In addition to meeting the challenges of technical complexity, Investment requirement is huge for any semiconductor fab unit. Electronic sector is one of the domains where 100% FDI is allowed under automatic route. Chipmakers are likely to get support beyond normal PLIs if they are really committed to India.

So far India manufacture chips for defence and space research at fab present within IISc, SCL Mohali, and few others places. Large scale manufacturing for consumer electronics and other high tech industries though is altogether a different ball-game. Technical complexity of the domain, Huge Investment requirements, availability of purest form of silica (raw material), very stringent cleanliness requirements at manufacturing site as well as huge water and uninterrupted power supply needs of this industry pose real challenge for India to match the competition of Taiwan, South Korea and China.

Indian Heritage for World’s Future

India is a torch bearer for modern times, and given its rich heritage, ancient and modern history, it’s story is crucial for sustainable, peaceful and prosperous future of the planet. For context, France became part of EU more or less from an Empire status, and USA, though an old state, became true democracy only around 60 years back. As Indian democracy is celebrating ‘azaadi ka amrit mahotsav’, every citizen needs to do something towards preserving, protecting and upholding democratic values. First and foremost of these is to be self-confident, willing to put in honest and hard work needed to produce success and grandeur, as have been amply demonstrated time and again in this land – this is where heritage sites, monuments and museums play a key role. India’s material culture produced over the years, has also captivated the world like anything. Indian Monuments attract the people in millions from world over. India has more UNESCO World Heritage sites than majority of the countries.

On this World Heritage Day, as the world celebrates its efforts to salvage the rich cultural heritage, India also takes pride for its efforts on the front. India has 10 more of its sites added to UNESCO’s World Heritage Sites list since 2014, taking the total to 40. Considering that 49 more sites are on India’s World Heritage Tentative list, India’s heritage monuments will be a game changer in the tourism sector.

Archaeological Survey of India (ASI) has created an online portal for Indian Heritage Sites/Monuments with an e-ticketing facility & a “Must See” List that features outstanding monuments. On the other hand, initiatives like ‘Adopt a Hertitage’ Scheme aim to enhance tourism experience of travellers. The scheme allows Public or Private sector companies to become ‘Monument Mitras’ after putting forth a proposal for adopting sites. As of now, 24 MoUs have been signed with Ministry of Tourism, ASI and Monument Mitras for active collaboration in upgrading and developing amenities at tourist heritage sites.

The government has also built many monuments of national importance to give our young generation a richer sense of Indian history. “Today, the development of tourist centres is not just a part of the government scheme, but a campaign of public participation. The development of our cultural heritage is a great example,” said PM Modi during the inauguration of the new Circuit House near Somnath Temple, Gujarat. This initiative of building new monuments of national Importance across the country has set new avenues for Indian heritage and its popularity across the globe. The government built the National War Memorial in New Delhi, the Statue of Unity in Gujarat, APJ Abdul Kalam memorial in Rameshwaram, etc. Similarly, the places associated with Netaji Subhash Chandra Bose and Shyamji Krishna Varma have been given grandeur. Adivasi museums are also being built across the country to bring forth the glorious history of Indian tribal society.

India, one of the world’s oldest civilizations, is an all-embracing confluence of religions, traditions and customs. A walk through any of the Indian heritage site fills one with ancient exuberance infused with stories of great rulers, spiritual leaders, artists, and all other beings that once walked the Indian soils. The finesse of Indian handicraft, the ethnicity of jewellery here, its silk and cotton textiles, even sweets and classical instruments, everything has come down as a heritage from ancient times and is being kept alive generation after generation. All said, Indian heritage is such a treasure and so subtle that it not only encompasses art, music, flora & fauna, print,designs and classical dances,but also its architectural advancement and intelligent engineering.

ISRO’s International Endeavours

The memory of transporting and assembling rockets and payloads on bicycles and bullock carts is still vivid in the minds of Indians. Today, far from it, ISRO has established a mark globally in the space sector by launching a total of 129 satellites of Indian origin. India has also led an incredible journey of launching a total of 343 foreign satellites belonging to 36 countries as of 14th February 2022, since 1975. Of this number, 39 are commercial satellites and the rest are nano-satellites.

The Indian Space Agency – ISRO has fostered the space ecosystem by opening avenues and opportunities for private players in the sector. Announcement of space sector reforms and the formation of IN-SPACe that regulates and promotes space sector activities brought in positive developments. Public Sector enterprise under the dept. of Space ‘NSIL’ has earned a Foreign Exchange revenue of about 35 Million US Dollars and 10 Million Euros during the last three years (2019-2021), by launching satellites of various private and international agencies. NSIL launched a total of 45 international customer satellites onboard ISRO’s PSLV during the last three years and has secured 4 Dedicated Launch service contracts for foreign satellite customers. Efforts are being made to use ISRO’s SSLV, PSLV, and GSLV-MkIII for such launches as well. Through launching foreign satellites, footprint of ISRO’s expertise is being ensured in building earth observation and communication satellites, providing launch and mission.

India’s space program stands out as one of the most cost-effective in the world. India has earned worldwide recognition for launching lunar probes, building satellites, ferrying foreign satellites up and has even succeeded in reaching Mars. Indian space programme has attracted global attention for its accelerated rate of development, with a critical appreciation for some of its extraordinary explorations, which include Mars Orbiter Mission (MOM) or Mangalyaan, Chandrayaan-2 Mission(India’s 2nd mission to the moon), AstroSat Mission (India’s 1st observatory mission for astronomy) and Aditya-L1 Mission (India’s 1st solar observatory in space). ISRO has forged a strong relationship with many industrial enterprises, both in the public and private sector, to implement its space projects.

India’s Polar Satellite Launch Vehicle (PSLV), is the protagonist behind providing launch service to international customers. The first such commercial service dates back to 26th May 1999, when KITSAT-3 of the Republic of Korea was launched onboard PSLV-C2 and DLR-TUBSAT of Germany along with India’s IRS-P4 (OCEANSAT).

India even holds a record of launching 104 satellites on a single rocket (PSLV-C37). This happened on 15th February 2017, when among the 104 satellites, 101 co-passengers were international customers, namely the USA (96), the Netherlands (1), Switzerland (1), Israel (1), Kazakhstan (1), and the UAE (1). The previous record was held by Russia of launched 37 satellites in 2014. In 2017, ISRO’s PSLV launched as many as 130 foreign satellites, the most in a year, followed by 2018 (60) and 2019 (50).

With an aim to flourish further, the Indian space Agency recently signed six agreements with four countries for launching foreign satellites from 2021-to 2023. 132 Million Euros would be earned through the launching of these foreign satellites on a commercial basis. As of 10th February 2022, India has a total of 53 operational satellites in space providing various identified services to the nation. 21 of these are communication satellites, 8 are Navigation satellites, 21 are Earth Observation Satellites and 3 are Science Satellites.

Green Money and Entrepreneurship Opportunities

‘Follow the money trail’, this adage from crime novels is proving true to look at the developments towards zero-emission economies. Literally, a sea change in mindset and flow of capital is needed to prevent reaching to the point of no return towards ecological damages. Finance Minister in her budget speech rightly pointed out that, “The risks of climate change are the strongest negative externalities that affect India and other countries.” Prime Minister had also said at the COP26 summit in Glasgow last November that, “what is needed today is mindful and deliberate utilisation, instead of mindless and destructive consumption.”

Presently around two-third of capital goes into high carbon emission economic activities, which need to be reversed completely towards low emission activities. The low carbon development strategy as enunciated in the ‘panchamrit’ that PM announced is an important reflection even of India’s strong commitment towards sustainable development. Further, This strategy opens up huge business and employment opportunities in multiple domains.

Consulting firm McKinsey identifies 11 domains with huge churning and opening up new business opportunities going forward. These are Transport, Building, Power, Water, Consumer, Agriculture and land use, Oil Gas and Fuels, Hydrogen, Waste, Industrials and Carbon Management. Some of these are surely on radar of budding entrepreneurs in India. With Gati Shakti promising to build unprecedented transportation infrastructure, electrification, micromobility and infrastructure for electrical vehicles are seeing increasing number of startups. It is becoming clear that automakers would cease to manufacture cars with internal-combustion engines and roll out EVs instead. Oil consumption would drop, in part because drivers would no longer need to fuel up—and electric-power generation would increase to help charge the world’s expanding fleet of EVs. A much greater share of that electricity would come from solar and wind rather than today’s coal- or gas-fired power plants. Similar opportunities are becoming viable in other domains too.

Capital to fund these have to increasingly come from Green Bonds. India issued $6.11 billion in green bonds in 2021, One of the strongest year since green bonds were first issued in 2015. India’s green bond issuance is set to reach a new record in 2022. Budget promised that, “As a part of the government’s overall market borrowings in 2022-23, sovereign Green Bonds will be issued for mobilizing resources for green infrastructure. The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy.”

Twin Engines of Robust Recovery & Efficient Taxation

India has made a quantum leap in Tax-to-GDP ratio in 2021-22 to reach a level of 11.7%. Tax to GDP ratio of 15% is said to be the tipping point for any country’s developmental trajectory. Some researchers have estimated that over 10 years, per capita GDP is 7.5 percent larger than would otherwise be expected in countries with tax revenues above the 15 percent ‘tipping point’. Below this level, key aspect for pushing for higher economic growth is increasing domestic resource mobilisation (DRM) and getting to 15% level of Tax-to-GDP ratio helps any country in generating sufficient domestic resources to invest in healthcare, education, and infrastructure. Therefore taking this ratio above 15% is a key ingredient for economic growth and, ultimately, poverty reduction.

India’s post pandemic recovery in tax collection is very remarkable even when looked from recent trends perspective. Ratio had fallen to 9.9% in 2019-20 from 11% in 2018-19. Last year, due to poor GDP it had increased to 10.2% and now with significant jump in economic activities, indicating robust recovery the jump of tax ratio to 11.7% is indeed a great news. India’s total tax revenue jumped 34% to ₹27.07 lakh crore in 2021-22, around ₹5 lakh crore more than the Budget estimate. This is clearly indicating the rapid recovery of the economy last year, and also efficient tax administration.

The key ingredients to this increase in tax collection are initiatives under Digital India and simplified corporate taxation. Measures related to ease of compliance and the use of data analytics and artificial intelligence to check evasions have laid the foundation for modern, convenient and transparent taxation system. Gross corporate taxes during 2021-22 were ₹8.6 lakh crore against ₹6.5 lakh crore last year, which shows that the new simplified tax regime with low rates and no exemptions has lived up to its promise thereby enhancing Ease of Doing Business. The number of corporate tax returns filed by businesses increased by 43,000 to over 986,000 .

It is also heartening to see that more of this tax growth is coming from direct taxes. Direct taxes play bigger role in reducing socio-economic inequality. This 11.7% includes a direct tax to GDP ratio at 6.1% and indirect tax to GDP ratio at 5.6%, the ministry added. According to provisional data released on Thursday , the revenue collection is led by 49% growth in direct taxes and 20% growth in indirect taxes. Total direct tax collection in the financial year ended March 31 was ₹14.10 lakh crore and indirect tax, ₹12.90 lakh crore.

It is common observation that as countries develop and income level rises, the ask from government for healthcare, public transportation, education etc rises rapidly and to fulfil that higher Tax-to-GDP ratio is instrumental. Developed countries have this ratio upwards of 30%, unless they have a huge contribution from non-tax revenue source like oil fields etc. In this light, efforts towards making India $5 trillion economy, thereby a global economic powerhouse, have started bearing fruits as directly reflected in India’s GDP growth in recent years.