Professional Documents
Culture Documents
Particulars
EXECUTIVE SUMMARY
Chapter I
Chapter II
Page No.
i-vi
Introduction
1.1.
Background
1.2.
1.3.
1.4.
Methodology
Organization of the Report
1.5.
1-2
2
2-3
4-6
2.2.
6-7
8-11
11-12
Hardware Industry
Chapter III
Chapter IV
Global Scenario
13-14
3.2.
14-18
3.3.
19-20
21-22
4.2.
22-23
23
India Vs China
24-26
4.4.
27-28
28-30
30-31
4.4.3
31-33
33-34
34-37
Chapter V
Chapter VI
37
37-41
41-43
43-46
Introduction
47
5.2.
47-49
5.3.
49-51
5.4.
Employment Trend
5.5.
Market Trend
51-54
5.6.
54-55
5.7.
5.8.
55-56
5.9.
56-58
5.10.
59
5.11.
60
51
II
24
55
61-64
Chapter VII
Recommendations
7.1.
Competitive Strategy
Electronics Firms
7.2.
Policy
Guidelines
for
for
IT
Skill
Hardware
and
65-67
Development
and
67
Training of Manpower
7.3.
Infrastructure Development
7.4.
7.5.
7.6.
7.7.
69
7.8.
69
7.9.
Fiscal Incentives
69
REFERENCES
Annexure
67-68
68
68-69
70
71-79
80-82
83-85
86
III
67
LIST OF TABLES
Table
No.
2.1
2.2
2.3
2.4
Particulars
Ranking and share (%) in Electronics Production
Ranking and Percentage share in Electronics Components
Production
Electronics Production Scenario in India
Page
No
4
5
7
2.5
11
2.6
12
3.1
13
3.2
15
3.3
3.4
16
3.5
19
3.6
20
4.1
21
4.2
23
4.4
4.5
25
26
4.6
27
4.7
28
4.8
29
4.9
31
4.10
32
4.3
18
24
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
5.11
5.12
5.13
5.14
5.15
5.16
5.17
VI
33
34
35
36
37
38
39
42
43
47
48
49
50
51
52
53
54
54
55
55
56
56
57
59
59
60
EXECUTIVE SUMMARY
Electronics and IT Hardware Industry is the largest and fastest growing manufacturing
Industry in the world. The current recession notwithstanding, the Indian IT hardware &
Electronics Industry has grown at approximately 7% per annum compared to global GDP
growth of 3-3.5%. The electronic industry in India constitutes just less than 1% of the global
electronic industry. However, the demand in the Indian market is growing rapidly though it
remains a major importer of electronic materials, components and finished equipment. A
series of market studies during the last few years have forecast rapid growth of electronics
hardware demand in India, going up from the existing US$40 billion to US$155billion by
2015 growing at 20%+ annual growth rate. This would be 12% of the projected GDP in 2015
against the present 2%. A manufacturing output of US$ 155 billion would have the potential
to create employment of 21 million (7million direct + 14million indirect) and Revenue of
approximately US$ 56 Billion (Rs.274,000Crores) including direct and indirect taxes (State
and Central). Present total employment in the sector is less than 2.5 Million and Revenue is
less than Rs.25, 000 Crores.
During the last 10-15 years, countries such as China, Korea, Taiwan, Singapore and
Malaysia have emerged as leading global IT hardware and electronics
manufacturer/exporters and has contributed significantly to the growth of their economies.
Indian electronics Industry has failed to keep pace with these countries and it is still in a
nascent stage of development, though the countrys software industry is well developed and
highly competitive in the global market. To ensure quantum jump in the production and
export of IT hardware and electronics, the performances of factors of production like human
resource, infrastructure, capital and technology needs to be enhanced through policy changes
and managerial action to boost the competitiveness of this sector.
A multi-pronged approach has been adopted for the study on IT Hardware and Electronics
industry in India. To assess the status of the industry, relevant data and information have
been collected from secondary sources and through field surveys at the unit level across 12
states covering 93 manufacturing units.
Profile of Indian Electronic Industry
The Indian IT Hardware and Electronics market is segmented product wise into seven broad
categories namely, Consumer Electronics, Controls, Instrumentation & Industrial
Electronics, Electronic Data Processing (IT Hardware), Communication & Broadcast
Equipment, Strategic Electronics and Electronic Components.
The overall production scenario in the Indian Electronics and IT Hardware sector is far
behind its current market demand of US$40 billion. The estimated production of various
segments of the industry during 2007-08 was estimated at US $ 20 billion.
In recent times, some SMEs are making investment in the tax-exempted regions and are
mostly doing Original Equipment Manufacturers (OEM) work for reputed Brands.
National Productivity Council, New Delhi
The electronics industry in India had initially grown around three major centers, Bangalore,
Mumbai/Pune and Delhi. Bangalore not only has major public sector units in defence and
telecommunication but also has a very fast-growing, organised private sector firms in
computer and industrial products. Bombay /Pune has been always a preferred destination for
private sector firms and MNCs. However, eastern India remained underdeveloped in
electronics and IT hardware production. The secondary electronics centers include
Hyderabad, Hosur, Thiruvananthapuram, Chennai, Kolkata, Vadodora, Mohali, Ahmedabad
and Aurangabad.
Uttar Pradesh has emerged as the leading state in the production of electronics and IT
hardware since 2001. Delhi also occupies a significant place due to large concentration of
small scale units making consumer electronic products and computers.
Productivity & Competitiveness Trends
Based on overall IT competitiveness index, US ranks number one. While India and China has
been ranked at 46th and 49th respectively in 2006. India fares better than China because of its
highly developed software industry but is far behind Chinas hardware sector. Even in the
Asia-Pacific region these two countries are lagging behind countries like Japan, South Korea,
Australia and Taiwan who are providing the most competitive conditions for operation of IT
firms.
In terms of IT labour productivity i.e., total output per employee in the IT industry, Taiwan
ranks number one followed by South Korea, Ireland , Singapore and Australia. IT labour
productivity of China is ranked 10th where as that of Indias is 22nd in the world. It clearly
indicates that both India (considered to be a global IT Software giant) and China (a leader in
IT hardware production/export) have attained their present status not because of higher
labour productivity but because of their competitive advantage in certain factors, such as
workforce size, low wages, English literacy etc.
Productivity
Productivity estimations carried out based on secondary data sources (registered factory
sector) reveals that labour productivity in IT Hardware and Electronics sector at all India
level increased from Rs. 188806 during 1995-96 to Rs. 324653 per person employed at
constant 1993-94 prices.
In the case of capital productivity, it increased from Rs. 0.32 per Rupee of capital investment
in 1995-96 to Rs. 0.60 per rupee of capital investment in real terms. Total Factor productivity
growth has reported a negative growth at the rate 5.07 percent per annum during 1995-96 to
2000-01. However Total Factor Productivity Growth recovered remarkably during the second
phase under study i.e. (2001-02 to 2005-06). TFPG has reported a positive growth rate of
2.88 percent per annum during this period.
ii
iii
involvement of these units in international trade is also moderate i.e. 41% units are engaged
in exports as compared to 38% engaged in imports. Most of the manufacturing units have
introduced various quality system accreditations like ISO 9001 and product innovations
during the last five years. About 26.2% of the manufacturing units are having patents.
As regards to productivity and competitiveness, most of the IT hardware and electronics firms
reported an increase during the last five years. While increase in total productivity has been
reported by 66% of the units; 74.5% of the respondents have reported increase in labour
productivity. The increase in productivity has resulted in overall competitiveness for 87% of
the respondents. Further analysis suggests that 80-85% of the respondents have reported an
increase in both cost competitiveness as well as price competitiveness.
It is further noted from the survey that employment has grown in 63.3% of IT hardware and
electronics firms whereas increase in casual labour is reported by 31.3% of firms.
Demand growth for Indian IT hardware and electronics is reported for both domestic and
export market. The increase in demand for IT hardware and electronics product in the
international market has been experienced by 66.7% of the exporters. About 74%
manufacturing units reported increase in profitability during the period 2000-2008.
About 90% of the industry comprises of small and medium sized firms and most of these firms
have a market share of less than 10%. This observation clearly goes with the economic
assertion that larger the number of firms smaller the market share of each firm.
Recommendations
The price of the products need to be competitive but not at the cost of quality. A single
low quality product is enough to spoil the reputation of a manufacturing firm and will
result in destroying the market demand for all other products of the brand in the long
run.
However, base models of an electronic product (e.g, Mobile, watch etc) with some key
features may be placed on the shelves at lower rates than the similar available
products of the competing firms. This will help firm in capturing the market sentiments
of the Indias vast population. Simultaneously, to target the rich and elite class,
exclusive models/ products need to be designed with advanced technology. Such
iv
products may be priced at high premium, as they would give the owner a sense of
pride.
Strengthening the global supply chain network as the industry is highly dependent on
the import of raw materials which would affect the competitiveness. The cost of the
supply network or logistic management network also needs to be assessed through
value chain analysis.
Scientific disposal of e-waste would ensure creation of safe environment & help in
sales promotion. The manufacturers of electronics and IT hardware firms may
undertake the development of human capital and disposal of e-waste as a part of their
corporate strategy under CSR. Efficient utilization of plant and machinery, reduction
in waste etc. would result in raising the productivity level of the firms and lowering
the cost of production, thereby increasing the profit margins providing a competitive
edge to the indigenous manufacturing units in the domestic market and reduce import
substitution.
Lack of adequate physical infrastructure like transport system, roads, ports, airports
etc. adversely affect the competitiveness and productivity of the IT hardware and
electronic sector. Uninterrupted power supply is a necessary condition for operation
of IT hardware and electronics units as power fluctuations lead to breakage of entire
system. Adoption of PrivatePublicPartnership (PPP) model can facilitate faster and
cost effective development of infrastructure. Current incentives to SEZs may be
continued and IT Hardware Parks be developed within SEZs. Financial incentives
need to be given to manufacturing units for establishing and maintaining of backup
power units and for utilizing non-conventional energy sources.
Since productivity estimations based on Labour and Total Factor Productivity Growth
rates have been found quite low in IT Hardware and electronics sector, there is a need
for substantial up gradation of skill levels of the personnel engaged in the sector and
also for the technological progress (R&D activities) in this sector.
Quality standards and systems need to be promoted among the Electronics and IT
Hardware manufacturing units. Electronics and IT Hardware manufacturing sector
has a great growth potential in India and export market. Government needs to
promote modern semiconductor industry for manufacturing various kinds of chips and
other essential components. Promotional activities need to be undertaken to attract
FDI and MNCs to start manufacturing units in India.
Fiscal incentives like rationalization of tariff on raw materials and capital goods,
lowering of excise duty on IT and Electronic goods, introduction of full Value Added
Tax (VAT) etc in conjunction with free environment to the manufacturers, speed of
business, proper communication, power supply, strong engineering and design base,
adequate R&D facilities etc. are the key to a successful and competitive hardware IT
industry.
vi
CHAPTER I
INTRODUCTION
1.1 Background
The field of electronics is changing at a very fast pace. In common parlance though
the term indicates a few isolated devices, in reality its now a meta-resource that
can be converged with a wide spectrum of applications. In the changed scenario,
electronic items are no more just a product for direct consumption but are enabler
for improving the productivity and efficiency of other manufacturing sectors like
automobile where it is applied. The electronic industry has the potential of creating
enormous employment opportunities (both high skilled and low skilled). It further
helps in the spread of education and healthcare through ICT (e-learning) and telehealth services to both rural and urban areas as well as implementation of eGovernance. Thus the growth of IT hardware & electronics has direct impact on the
socio-economic development of a country and determining its competitiveness.
During the last decade of 20th century, countries such as China, Korea, Taiwan,
Singapore and Malaysia have emerged as global leaders in IT hardware and
electronics manufacture and export. The growth of IT hardware and electronics sector
has significantly contributed to the growth of these economies. India has not only
failed to keep pace with the economic development of these countries but its IT
hardware and electronics industry is still in a nascent stage of development, though
the countrys software industry is well developed and highly competitive in the global
market.
1.2 Objective of the Study
Since India is trailing behind her neighbouring Asian countries in the production and
export of IT hardware and electronics, a study on the major factors of production such
as human resource, capital investment and technology would provide indicators for
the future policy directions to make the sector more productive and competitive.
Thus, the major objective of the present study is to assess the productivity and
competitiveness of Indian IT Hardware and Electronics Sector. The study is aimed to
identify factors hindering the progress of the sector and suggest measures for
enhancing the competitiveness of the sector.
1.3 Methodology
The study on IT Hardware and Electronics Industry has been carried out considering
the nascent stage of development and the changing nature of competition in this
emerging market. In this study, relevant data and information have been collated and
compiled from both primary and secondary sources. For the compilation of field level
data, detailed field survey was undertaken across 12 states through a structured
questionnaire (Annexure 1). The states were chosen keeping in mind the
concentration of the IT Hardware and Electronics industry and regional distribution
across India. The stakeholders like senior management of various IT hardware and
electronics manufacturing units as well as industry association members were
National Productivity Council, New Delhi
| Page No.
interviewed to find out the market realities and factors hindering productivity and
competitiveness of the sector. A total 93 manufacturing units from IT Hardware and
Electronic Sector participated in the NPC field survey
(Annexure 2).
Productivity indicators for major factor inputs have been computed for Electronics
and IT Hardware Industry during post liberalization (1991-2006) period from Annual
Survey of Industry (ASI) data. Since the demand for IT Hardware and Electronics
products are highly dependent on the external economy, the international scenario
also has been analysed. Globalisation has also opened new market opportunities as
well as challenges for the sector.
The competitiveness of the Indian IT Hardware and Electronics sector in the global
market has been studied on the basis of the findings of various international studies
such as IT competitiveness Index, 2007 by Economist Intelligence Unit and Trade
Performance Index, 2006 by International Trade Center, ITC Geneva, Switzerland.
The interactive market analysis tool developed by ITC has been used to find out
changing share in Indias global IT Hardware & Electronics and Electronic
Components market due to variations in competitiveness.
The Yearbook of World Electronics Data, 2004-2005, Volume 2& 3 by Reed
Electronics Research Ltd, England, World Competitiveness Yearbook, 2007 & 2009
by IMD, Switzerland and Knowledge Assessment Methodology, 2006 by World Bank
are also elucidated to identify the strengths and weaknesses of the business
environment that has a bearing on the competitiveness of IT Hardware and
Electronics sector in India.
1.4 Organization of the Report
The report is presented in seven chapters. Chapter I provide the introduction,
objective and methodology of the study. Chapter II deals with Indias position in the
world IT Hardware and Electronics market. Further, the production scenario of IT
hardware and Electronics sector in India is substantiated in this section. Chapter III
discusses productivity scenario in the international IT industry (including hardware
and Software). This is followed by analysis of the productivity trends of the Indian IT
Hardware and Electronics Sector for the period 1991-2006. Chapter IV deals with the
competitiveness of Indian IT Hardware and Electronics Sector. Further, this chapter
also discusses the competitive advantages and disadvantages of this sector. The
government policy is discussed in the relevant areas to understand its influence on the
Sector. Chapter V, analyses Indian IT Hardware and Electronics sector based on
results of a field survey that was carried out across Indian states. Chapter VI provides
issues and concerns of the sector and Chapter VII provides recommendations for
enhancing productivity and competitiveness of the sector.
1.5. Limitations & Constraints
Keeping in view of the initially set scope of work to focus the study mainly on
secondary data sources, which has its own limitations as regards to reliability of data
| Page No.
in working out futuristic projections. In order to substantiate the secondary data, field
evidences have been also included through a primary survey later on.
Due to the limited budgetary provisions, the unit level data survey coverage was
undertaken with limited scope and coverage. The outcome of the study and the
recommendations thereof are generic in nature. However, efforts have been made to
minimize such constraints through analyzing various data sources available to arrive
at broad recommendations for the development of the sector. The recommendation
have been formulated which are implementable in nature.
| Page No.
CHAPTER II
IT HARDWARE & ELECTRONICS SECTOR: AN OVERVIEW
2.1 World Electronics Market
It is interesting to note that top electronic hardware manufacturing countries are not
always leading component manufacturers in terms of their contribution (in percent) to
world production. For example, USA leads in equipment manufacturing whereas
Japan is leader in component manufacturing. Moreover, the production base of
electronics hardware is gradually shifting to countries like China and S. Korea. After
USA and Japan, it is China that has emerged as 3rd largest electronic hardware
production center and its share has grown from 8.3 per cent in 2001 to 14.7 percent in
2004. The ranking of India along with the top 10 electronic hardware and electronic
components producing countries is shown in Table 2.1. These top 10 countries
together contribute nearly 80 per cent world electronics production and 85 per cent of
world electronic and components production respectively.
Table 2.1: Ranking and share (%) in Electronics Production
Country
China
France
Germany
India
Japan
Malaysia
S. Korea
Singapore
Taiwan
UK
USA
1998
3
8
4
28
2
10
6
7
9
5
1
Electronics
Ranking
Share (%)
2001
2004
1998
2001
2004
3
3
4.8
8.3
14.7
11
11
3.4
2.7
2.4
5
5
4.6
4.3
3.9
29
24
0.4
0.4
0.5
2
2
18.1
16.7
14.9
7
6
2.7
3.5
3.6
4
4
3.8
4.7
5.8
9
8
3.5
3.1
3.2
8
7
3.1
3.4
3.6
6
9
4.4
4
3.2
1
1
29.8
28.2
25.1
Source: Kumar (2006), Electronics Information and Planning, Vol 33, 3 4, Dec2005-Jan-2006
Japan and USA together contributed 48.6 per cent of electronic component production
in 1998, which decreased to 43.4 per cent during 2004 where as that of China
improved from 4.1 per cent in 1998 to 10.1 per cent during 2004. Countries of the
Asia Pacific Region viz., South Korea, Taiwan, Singapore, Malaysia and Thailand
have significantly improved their share in electronic component production as
detailed in Table 2.2 where as countries of Western Europe Viz; Germany, UK and
France have shown consistent reduction in their share to world electronic production.
| Page No.
23.7
19.7
8.7
5.1
4.6
0.18
2.4
2.4
U
SA
ia
In
d
er
m
an
y
5.7
M
al
ay
si
a
S.
K
or
ea
Si
ng
ap
or
e
Ta
iw
an
Th
ai
la
nd
3.3
Ja
pa
n
15
10
%age
20
The share of high-cost locations (such as the United States, Western Europe and
Japan) in worlds production of electronics output declined from 75 per cent in 1995
to 53 percent in 2005. However, during the same period, the share of Asia/Pacific
region in the global electronics production increased from 20 per cent to 38 per cent
and that of China alone increased from 3 per cent to 16 per cent. Chinas production is
18.75 times that of India and its share in global production is more than 20 times that
of Indias. The figures for Electronics Manufacturing in countries like China, S.
Korea, Singapore in 2005 are $210 billion, $95 billion and $45 billion respectively as
compared to Indias $12.7 billion. Thus, India has under-performed with respect to
not only China but also other Asian countries as well.
It is worth noting that though there has been a change in geographical map of
production units of electronics and IT hardware, there is no significant growth in
indigenous manufacturing companies. This may be attributed to the fact that the bulk
of the components and electronic products produced in Far East and other developing
countries are subsidiary production units of MNCs with headquarter in USA, Japan or
Germany. Relatively low cost assembly based production has shifted to China,
Countries of Far East viz., Taiwan, Singapore, Malaysia, Thailand, Philippines and
National Productivity Council, New Delhi
| Page No.
Latin America. The focus of USA, Japan, South Korea and Western Europe countries
has shifted to high technology and knowledge intensive manufacturing.
2.2 An overview of Indian Electronics and IT Hardware Industry
The Indian electronics industry has been broadly classified into two categories,
namely IT Hardware & Electronics and Software. The production of IT (Hardware
and Software) and electronics, which was worth about Rs 150 million in 1960, has
increased to Rs 1730 million in 1971 and Rs 8900 million in 1981. It has further
increased to Rs 94,344 million in 1991 and to Rs 35,01,300 million in 2008.
During the period 1991-2008, the electronics industry as a whole experienced an
overall annual growth of 23.69 per cent. However, major growth can be traced to
Indian software and services industry that grew at the annual rate of 40.63%, in
comparison, the IT hardware and electronics sector experienced a moderate growth of
only 14.34% during the same period. By 2008, the production of software and
services in India reached
Rs. 25,80,000 crore. The Business Process
Outsourcing (ITES-BPO) sector has emerged as a key driver of this phenomenal
growth in the Indian software and services Sector.
It is of course, encouraging to note that in recent decade (2001-2008) IT hardware and
electronics sector has experienced a higher growth than the last decade (1991-2000).
But production of electronics and IT hardware as a proportion of total production in
the electronics industry has been continuously declining as it declined from 45 percent
in 2000 to 26 percent in 2008 (table 2.3).
| Page No.
Total
Computer
Electronic Software
1991
9434
_
1992
11016
_
1993
14567
1550
1994
17789
2351
1995
21290
3900
1996
25253
5700
1997
30959
9300
1998
39998
15200
1999
50754
23000
2000
68650
37550
2001
76750
44600
2002
92800
56000
2003 113200
70500
2004 145300
95500
2005 178500 124000
2006 231575 167175
2007 282860 203060
2008 350130 258000
CAGR (1991-2000)
CAGR (2001 to 2008)
CAGR (1991 to 2008)
Electronics
Hardware
9434
11016
13017
15438
17390
19553
21659
24798
27754
31100
32150
36800
42700
49800
54500
64400
79800
92130
Growth (%)
Electronics
Hardware
Production
Share (%)
_
_
89.36
86.78
81.68
77.43
69.96
62.00
54.68
45.30
41.89
39.66
37.72
34.27
30.53
27.81
28.21
26.31
Total
Electronic
Computer Electronic
Software Hardware
_
16.77
32.23
22.12
19.68
18.61
22.60
29.20
26.89
35.26
11.80
20.91
21.98
28.36
22.85
29.73
22.15
23.78
_
_
_
51.68
65.89
46.15
63.16
63.44
51.32
63.26
18.77
25.56
25.89
35.46
29.84
34.82
21.47
27.06
_
16.77
18.16
18.60
12.64
12.44
10.77
14.49
11.92
12.06
3.38
14.46
16.03
16.63
9.44
18.17
23.91
15.45
24.67
57.67
14.17
24.21
28.50
16.23
23.69
40.63
14.34
Note: In case of software for calculating CAGR 1991-2000, the 1993 data is used instead of 1991
Source: Data from 1991-1999, Guide to Electronics Industry, Data from 2001 to 2006 is from Dept. of
IT website and 2000 is from Economic Survey 2006-07
| Page No.
2003
2004
2005
2006
2007
CAGR
%
2008 (20012008)
49800
54500
64400
79800
92130
16.23
16500
17500
19500
21950
25140
10.75
4480
5400
5980
8300
8600
10100
11530
12530
15.83
3520
4180
6600
8680
10500
12500
15100
14090
21.91
16400
24180
27.35
5400
6560
20.78
9420
9630
7.92
2001
2002
Communication
4450 4800 5150
4770
6300
9200
& Broadcast
Equipment
Strategic
1750 2330 2670
2850
3070
4500
Electronics
Electronic
5650 6510 7450
8700
8530
8600
Components
Software
44600 56000 70500 95500 124000 169000
(Total)
Software for
34000 44000 55000 75000 97000 132025
Exports
Domestic
10600 12000 15500 20500 27000 35150
Software
Total
76750 92800 113200 145300 178500 231575
Electronics
Note: CAGR = Cumulative Average Growth Rate
Source: Dept. of IT (website & Annual Report 2007-08 & 2008-09)
54670
26.41
| Page No.
Consumer Electronics: Consumer electronics contributes more than 30% of the total
electronic hardware production in the country and the Colour TV segment would be
the largest contributor with a domestic market of more than 12 million units. The shift
in demand with rise in income is prominent in the TV market. The Black and white
TV (B/W TV) is continuously registering a negative growth where as CTV is steadily
rising. Most of manufacturers of B/W TV are shifting to grey market due to high level
of taxation on this product, which is meant for rural masses. Similarly, the
DVD/VCD/CD Players market is steadily taking over the Analog Audio segment,
which is experiencing a declining trend.
The growth in CTV segment may be attributed to rise in income as well as enthusiasm
of majority of Indians to watch popular sports events such as Cricket and daily sops
that are being broadcasted. The introduction of DTH broadcasting has further
contributed to the rise in demand of LCD TV and Home Theater. The high end
products, particularly Liquid Crystal Display (LCD) TVs have registered 400%
growth in 2006-07 and the total market for the LCD TV and the Plasma TV is
projected to be over 150,000 and 50,000 respectively. Till now there is not a single
LCD TVs production unit in India. However, rapid increase in the sale of this product
has prompted a few MNCs and Indian companies to announce their intention to start
production of LCD TV in India.
Introduction of Conditional Access System (CAS) has resulted into an exponential
growth in the Set Top Boxes (STB) market. However, STB are mainly imported, as
customs duty on STB is zero. STB production is expected to take off and more than
2.5 million STBs would be produced in the year 2007-08 if customs duty on STBs be
made at par with other consumer electronic products.
The overall production scenario in the Indian consumer electronics segment is far
behind its current market demand. In recent times, some SMEs are making investment
in the tax-exempted regions and are mostly doing Original Equipment Manufacturers
(OEM) work for reputed Brands. Of course, it is encouraging to note that Samsung
National Productivity Council, New Delhi
| Page No.
Electronics is setting up production unit for Colour TVs and Monitors in Tamil Nadu
and LG Electronics has also announced investment and making India hub for exports.
Control, Instrumentation and Industrial Sector: The application of electronics and
information technology is mainly seen in the Control, Instrumentation and Industrial
Sector. Moreover, newer technologies involving wireless sensors and sensor
networking are emerging as potential application in the field of industrial automation
technologies as these are inexpensive and easy to install. Though manufacturing of
related hardware in technology areas like Distributed Control Systems and UPS is
increasing in India, still there is substantial dependence on imported hardware and
software for this sector.
The Department of IT has already realized that subsystems that constitute a part of the
knowledge enabled enterprise control system are presently available in India as
independent packages. But integrating these modules developed by different vendors
using varied interfacing and communication standards is a wearisome task due to lack
of inter-operability. To overcome this problem, national collaborative development
initiatives on next generation Automation Technologies have been already
conceptualized by the DIT to bring out an open standard based flexible control
system, in a holistic manner.
IT Hardware Industry: The development in the overall Indian ICT sector and ITES
in particular during the period 2001 to 2008 is continuously increasing the domestic
demand for IT hardware and this push factor is encouraging local firms to raise their
production level. The IT hardware industry though is far behind that of Chinas, in
recent times (2001-2008) has grown at more than 16 percent per annum.
Communication & Broadcasting Sector: There is no doubt that the growth in
Information and Communication Technology (ICT) has contributed significantly in
Indias economic development. The over all tele-density reached 17.16% during
December 2006. The gross telephone subscribers has reached to about 190 million,
out of which 150 million are mobile telephone subscriber and total broadband
connections in the country have reached 2.10 million by December 2006. A target of
250 million telephones (tele-density of about 22%) and broadband connectivity of 10
million subscribers have been set to be achieved by end of 2007 and by 2010
broadband subscribers is expected to be around 20 million. check
The huge mobile handsets Indian market has tempted world renowned mobile set
manufacturers to set up production base for mobile hand sets in the country to not
only meet local demands but also to cater to international markets. It is highly
encouraging to see that worlds top five mobile handset makers - Nokia, Motorola,
Samsung, Sony-Ericsson and LG have started their manufacturing in India.
Strategic Electronics: In India the technology applicable to strategic sector as well as
strategic technology for civilian and defense sector is not available off the shelf. In
order to ensure acquisition of the state-of-the-art technology, it is desirable to focus on
production in the strategic electronics sector.
National Productivity Council, New Delhi
| Page No.
10
2002
States
Production
(Rs Crores)
Share
(%)
Rank
Production
(Rs Crores)
Share
(%)
Rank
Total
Units
(No.)
SSI
Uttar Pradesh
Maharastra
Karnataka
Delhi
Andhra
Pradesh
Tamil Nadu
Haryana
Gujarat
Kerala
Madhya
Pradesh
1915
1762
1750
921
585
19.69
18.12
18.00
9.47
6.02
1
2
3
4
6
7715
7219
6232
3190
2030
20.96
19.62
16.93
8.67
5.52
1
2
3
4
5
170
809
363
354
169
115
693
289
330
132
622
170
361
421
151
6.39
1.75
3.71
4.24
1.55
5
12
8
7
13
1839
1451
1260
1121
787
5.00
3.94
3.42
3.05
2.14
6
7
8
9
10
278
97
244
88
43
220
59
199
57
26
| Page No.
11
Further analysis of regional distribution shows that the Northern region mainly Delhi
and its surrounding areas account for over 38 per cent of production. The East is
underdeveloped relative to its population. The West accounts for 25 per cent of
electronics production, mostly in Maharashtra (Mumbai and Pune) contributed mostly
by private sector firms both in small scale and organised sectors. The South, primarily
Bangalore, accounts for about 30 percent of production. Table 2.6 gives the
sectorwise electronics production during 2002 in top 10 states.
Table 2.6: Sectorwise Electronics Production in Top 10 States (2002)
(Rs crores)
States
Uttar
Pradesh
Maharastra
Karnataka
Delhi
Andhra
Pradesh
Tamil
Nadu
Haryana
Gujarat
Kerala
Madhya
Pradesh
Control,
Consumer
Computer
Strategic Electronic
Instn & Ind
Telecom
Total
Electronic
Hardware
Electronic Component
Electronic
4230
400
550
1130
295
1110
7715
3680
950
1410
265
1055
1830
200
505
1360
350
350
150
185
800
75
270
74
1062
5
660
865
1240
1150
180
7215
6232
3190
2030
950
310
145
177
37
220
1839
400
540
320
35
25
180
160
52
25
15
15
_
585
125
420
90
126
_
11
_
90
400
195
610
1451
1260
1121
787
| Page No.
12
CHAPTER III
PRODUCTIVITY GROWTH IN IT HARDWARE &
ELECTRONICS SECTOR
3.1 Global Scenario
The Economist Intelligence Unit (2007) ranked 64 countries in terms of IT labour
productivity (Total output per employee in the IT industry). Output has been
measured as value of production for both IT hardware and software in US Dollar for
the year 2006. Table 3.1 reports that among the labour productivity is highest in
Taiwan, followed by South Korea, Ireland, Singapore and Australia. IT labour
productivity of China has been ranked 10th where as that of Indias rank is 22nd in the
world.
Table 3.1 : Labour Productivity in World IT Market
Rank
Country
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
Taiwan
South Korea
Ireland
Singapore
Australia
Switzerland
United States
Japan
New Zealand
China
Denmark
Norway
United Kingdom
Belgium
Germany
Israel
France
Austria
Brazil
Greece
Hong Kong
India
| Page No.
13
The study clearly reveals that both India (considered to be a global IT Software giant)
and China (a leader in IT hardware production and export) have attained their present
status not because of higher labour productivity but due to their competitive
advantage in certain factors such as availability of educated workforce, low wages,
language attributes such as, English speaking population (in case of India) etc.
3.2 Electronics and IT Hardware Industry: Organized Factory Sector
The Electronics and IT Hardware Industry comprises of organized as well as
unorganized industries. Due to lack of data on the operation of unorganized industries,
an analysis of the organized factory sector is done to get an idea of the Indian
Electronics and IT Hardware Industry. Annexure 3 shows the methodology used for
analyzing the electronics and IT Hardware Industry.
The structural constituents of the Electronics and IT Hardware Industry may be
understood from the analysis of organized factory sector that mainly consists of largescale enterprises. Further, impact of globalisation and various government policies on
the electronics and IT hardware sector may be analysed through the developments in
the organized factory sector. The data are collected from Annual Survey of
Industries, Central Statistical Organisation (CSO), Government of India.
The data from 1990-91 to 1998-99 for the Electronics and IT Hardware Industry
pertains to 3 digits NIC 1987 code. For the later years, the equivalent of 2-digit NIC
Code are calculated by adding the 4- digit NIC codes as per the concordance table
given by CSO (Annexure 4).
The number of factories in the Electronics and IT Hardware Industry is showing a
declining trend during the last one and half decade and the rate of decline is higher
during the latter period i.e. 2000-01 to 2005-06 than during 1990-91 to 2000-01. The
number of person engaged also declined at the rate of 0.34 percent during the period
1990-91 to 2005-06. The decline in employment is greater during in the recent times
(2000-01 to 2005-06).
| Page No.
14
Number of
Factories
Number of
Workers
Total Persons
Engaged
CAGR
Total Period
Period
I
(1990-91 (1990to 2005- 91 to
06)
200001)
Period
II
(200001 to
200506)
1.05 -0.05
3.01
1591
1583
1432
1314
1371
1359
96770
97270
87274
85540
91416
103129
0.43
0.05
1.18
158991
151130
135387
132941
138300
151102
0.34 -0.51
0.01
7.19
5.28
6.13
6.22
2.87
31.19
10.22
6.65
11.15
Value of Output
at Constant
802656 1342528 1233887 1557086
3828149 2273716
Prices (199394=100)
GVA at
Constant Prices 198493 263448 262123 301222 654219 490556
(1993-94=100)
Fixed Capital at
constant prices 242532 461698 411513 611201 1305165 1043311
(1993-94 =100)
It is very encouraging to note that the value of output at constant price has increased
during 1990-91 to 2005-06 at a CAGR of 5.23 percent. However, the growth in the
value of output during 2000-01 to 2005-06 is higher than that of 1990-91 to 2000-01.
This has resulted in an increase in the growth of gross value added at a CAGR of 3.26
percent during 1990-91 to 2004-05. The growth of GVA at constant prices during the
period 2000-01 to 2004-05 is also higher than that of 1990-91 to 2000-01 (Table 3.2).
National Productivity Council, New Delhi
| Page No.
15
The individual item wise performance analysis of the electronics and IT hardware
industry during the last one and half decade is given in Table 3.3 and Table 3.4. The
number of factories and workers employed in the manufacturing of four segments out
of five product segments reported decline during 1990-91 to 2005-06 (Table 3.3).
However, Gross Value Added at constant prices have contributed substantial increase
for all the five segments of IT Hardware and Electronics sector.
Table 3.3: Key Characteristics of Electronics and IT Hardware Industry
Segment
Manufacture of
office,
accounting and
computing
machinery (NIC
98: 3000)
Manufacture of
electronic valves
and tubes and
other electronic
components
(NIC 98: 3210)
Characteristics
Number of Factories
Number of Workers
Total Persons Engaged
Value of Output at
Constant Prices
(1993-94=100)
GVA At Constant
Prices (1993-94=100)
Fixed Capital at
constant prices
(1993-94=100)
Number of Factories
Number of Workers
Total Persons Engaged
Value of Output
at Constant Prices
(1993-94=100)
GVA At Constant
Prices (1993-94=100)
Fixed Capital at
constant prices
(1993-94=100)
1990-91
257
14044
27348
2000-01
224
11753
19343
2005-06
180
14368
21776
161425
303958
455913
42487
60190
147509
41030
299
11822
20768
78832
577
32977
49001
207741
564
39257
59251
60576
350816
666042
19106
101333
125731
33063
332
10253
57491
255836
268
16781
30069
328586
237
18503
27734
251177
227090
347598
82531
43531
74426
74260
542
24052
36524
70946
334
22822
32892
233414
235
20224
28904
268015
726901
729674
39088
101366
110461
| Page No.
16
59270
161
12511
16860
181207
180
12937
19825
252169
143
10777
13437
16463
79528
74489
15281
24879
32430
34909
28150
21401
Source:EstimatedfromASISummaryResultsofFactorySector
During the period 1990-91 to 2005-06, there has been negative growth in the numbers
of factories, the amount of fixed capital and workers employed in almost all the
segments of electronics and IT hardware sector viz., manufacture of office,
accounting and computing machinery, manufacture of television and radio
transmitters and apparatus for line telephony and line telegraphy, manufacture of
television and radio receivers, sound or video recording or reproducing apparatus and
associated goods and manufacture of watches and clocks (Table 3.4). This might have
resulted in declining the growth rate of the gross value added as well as value of
output in the manufacture of television and radio transmitters and apparatus for line
telephony and line telegraphy and manufacture of watches and clocks.
However, during the period 1990-91 to 2005-06, the manufacture of electronics
valves and tubes and other electronics components showed positive growth in all the
characteristics viz., the numbers of factories, the amount of fixed capital,
workers/persons employed as well as value of output and gross value added. But in
recent years ie., from 2000-01 onwards, a decline has been noticed in the number of
factories and workers employed.
| Page No.
17
Characteristics
Manufacture of
Number of Factories
office,
accounting and Number of Workers
computing
Total Persons Engaged
machinery (NIC
Value of Output at Constant Prices
98: 3000)
(1993-94=100)
GVA At Constant Prices (1993-94=100)
Fixed Capital at constant
prices (1993-94=100)
Manufacture of Number of Factories
electronic valves
and tubes and Number of Workers
other electronic Total Persons Engaged
components
Value of Output at Constant
(NIC 98: 3210) Prices (1993-94=100)
GVA At Constant Prices (1993-94=100)
Fixed Capital at constant
prices (1993-94=100)
Manufacture of Number of Factories
television and
Number of Workers
radio
transmitters and Total Persons Engaged
apparatus for Value of Output at Constant
line telephony Prices (1993-94=100)
and line
telegraphy (NIC GVA At Constant Prices (1993-94=100)
Fixed Capital at constant prices
98: 3220)
(1993-94=100)
Manufacture of Number of Factories
television and
radio receivers, Number of Workers
sound or video Total Persons Engaged
recording or
Value of Output at Constant Prices
reproducing
(1993-94=100)
apparatus, and
associated goods GVA At Constant Prices (1993-94=100)
(NIC 98: 3230) Fixed Capital at constant prices
(1993-94=100)
Manufacture of Number of Factories
watches and
clocks (NIC 98: Number of Workers
Total Persons Engaged
3330)
Value of Output at Constant
Prices (1993-94=100)
GVA At Constant Prices (1993-94=100)
Fixed Capital at constant prices
(1993-94=100)
0.91
1.18
2.28
-1.36
-1.77
-3.40
4.28
4.10
2.40
4.31
2.35
-9.55
2.88
8.45
19.64
4.45
4.48
7.08
5.89
3.73
6.79
10.80
8.96
21.38
0.45
3.55
3.87
12.42
11.76
16.50
15.48
13.68
4.41
14.61
1.42
3.34
4.23
19.24
-2.12
5.05
-6.28
5.13
2.43
1.97
1.60
0.67
4.18
-3.25
-8.32
8.89
11.32
0.30
3.18
0.35
0.70
-3.27
-4.73
-0.52
-1.04
26.89
6.79
2.39
2.55
6.88
6.56
7.99
7.51
0.08
1.73
7.73
0.75
0.22
1.09
8.66
1.12
0.34
1.63
6.83
4.50
3.59
7.48
11.07
3.30
14.41
2.62
1.30
5.44
-4.89
5.33
1.42
Source:EstimatedfromASISummaryResultsofFactorySector
| Page No.
18
Labor
Productivity
(Rs.)
Capital
productivity
(Rs.)
Labor
Productivity
Growth
Rate(%)
Capital
Productivity
Growth
Rate(%)
1995-1996
188806
0.32
1996-97
198538
0.32
6.87
0.72
1997-98
172448
0.28
5.11
-14.64
1998-99
215684
0.61
-12.92
119.89
1999-00
206085
0.70
-17.48
15.51
219214
2000-01
0.55
6.07
-21.65
2001-02
249254
0.72
1.86
31.31
2002-03
294370
0.63
19.13
-12.97
2003-04
300522
0.46
-0.62
-25.96
2004-05
252559
0.54
-12.57
17.12
2005-06
324653
0.71
40.44
30.11
Average
196312
0.45
4.61
30.37
1995-00
Average
273429
0.60
9.05
2.99
2000-06
Source:EstimatedfromASISummaryResultsofFactorySector
Total Factor
Productivity
Growth Rate
(%)
6.09
11.61
-70.92
51.55
-23.68
4.52
17.83
15.04
-16.74
20.33
5.07
2.88
| Page No.
19
Table3.6:IndexofLabour,CapitalandTotalFactorProductivityGrowthIndices:
Year
199596
199697
199798
199899
199900
200001
200102
200203
200304
200405
200506
Capital
Productivity
GrowthIndex
Labour
Productivity
GrowthIndex
Totalfactor
Productivity
GrowthIndex
100.00
100.00
100.00
100.72
106.87
106.09
86.08
111.99
117.70
205.98
99.06
46.78
221.48
81.58
98.34
199.84
87.65
74.65
231.14
89.51
79.17
218.18
108.64
97.01
192.22
108.02
112.05
209.34
95.45
95.30
239.45
135.89
115.64
Source:EstimatedfromASISummaryResultsofFactorySector
Labour,CapitalandTotalFactorProductivityGrowthIndices
| Page No.
20
CHAPTER IV
COMPETITIVENESS ANALYSIS OF IT HARDWARE &
ELECTRONICS SECTOR
4.1 Benchmarking IT Industry Competitiveness
The growth potential of domestic IT industry (both hardware and software) depends
on the existence of favourable conditions in several interrelated areas like the quality
of the IT and communications infrastructure, the supply of local talent, the research
and development (R&D) environment and the legal regime, not to mention the overall
business environment. A study undertaken by the Economist Intelligence Unit 2008
ranked 64 countries by assessing the enablers of competitiveness and determining
their relative importance in IT sector performance.
In the overall IT competitiveness index, US ranks number one as its IT environment
combines scale and quality in the key areas that promote competitiveness, including
education, infrastructure and encouragement of innovation, as well as solid legal
protection. India and China has been ranked at 46th and 49th respectively in the overall
IT competitiveness index. India fares better than China because of its highly
developed software industry but is far beyond Chinas hardware sector. Even in the
Asia-Pacific region these two countries are lagging behind countries like Japan, South
Korea, Australia and Taiwan who are providing the most competitive conditions for
operation of IT firms. The relative IT competitiveness ranks of countries in AsiaPacific region are given in Table 4.1.
Table 4.1: IT industry competitiveness in Asia-Pacific Region
Rank
Country
Score
1
Taiwan
69.2
2
Australia
64.1
3
South Korea
64.1
4
Singapore
63.4
5
Japan
62.2
6
New Zealand
56.6
7
Hong Kong
54.1
8
Malaysia
34.2
9
Thailand
31.5
10
Philippines
29.8
11
India
28.9
12
China
27.6
13
Sri Lanka
24.9
14
Indonesia
23.1
15
Bangladesh
22.4
16
Vietnam
21.4
Source: Economist Intelligence Unit, 2008.
| Page No.
21
Actually, in case of both India and China, the negative impacts arising out of
weaknesses in the industry environment has been overshadowed by positive effects of
their competitive advantages in factors like huge workforce, low wages and vast
english speaking population (India). However, this high growth of Indias IT software
industry as well as Chinas IT hardware manufacturing cannot be sustained in the
long run unless immediate attention is given by policymakers to improve the business
environment in their respective country.
Future rivalry for Indias and China s positions is likely to come from countries like
Russia, Brazil, Malaysia and Vietnam, as well as smaller markets such as Estonia,
Lithuania and Chile as the skills base of each of these countries is improving. The
warning bell has already been sounded India and China will need to improve here as
well, as their cost advantages will erode; greater innovation will be required of their
IT firms to remain competitive on a global scale"(EUI, 2007). Thus, finding of this
study needs to be taken seriously by Indian policy makers and sincere efforts need to
be taken to improve the business environment, infrastructure both social and physical,
etc., encourage R&D activities and innovation to remain competitive in the global
market.
The Standing Committee on Information Technology (2004-2005) Fourteenth Lok
Sabha has already reported that the policy environment needs to be much more
conducive to the manufacturer, more so, in view of the zero per cent duty which will
become effective w.e.f. 2005 under the WTO agreement. Further, creating basic
infrastructure e.g. guaranteed communication, uninterrupted power supply, speed of
business for having competitive advantage and a thriving business climate is
government responsibilities, to transform the struggling IT hardware and Electronics
industry into a vibrant and competitive Industry.
4.2 India in Trade Competitiveness Map of IT Hardware & Electronics
Competitiveness of the Indian IT Hardware and Electronics sector is further analysed
using the Trade Performance Index (TPI) which has been developed by the
International Trade Center (ITC) Geneva, Switzerland, with the aim of assessing and
monitoring the multi-faceted dimensions of export performance and competitiveness
by sector and by county. This particular index is used in this study as TPI calculates
National Productivity Council, New Delhi
| Page No.
22
Indicator's description
Change Index
Share in world market (%)
Relative change of world market share p.a
(%)
Change between
2002 2006
Value Rank
0.09%
37
0.0528%
0.1105%
Competitiveness effect, p.a. (%)
Initial geographic specialisation, p.a. (%)
0.0063%
Initial product specialisation, p.a. (%)
-0.0317%
Adaptation effect, p.a. (%)
-0.0323%
Number of exporting countries for the
107
ranking in the sector
Average Current Index
Source: International Trade Center, Geneva (2006)
Change between
1998-2002
Value
Rank
0.07%
40
0.1855%
25
0.2206%
16
64
85
71
0.0056%
0.0597%
-0.1004%
45
21
72
96
47
46
The effect of geographical specialization on Indias share in the world market has
been not only positive but also increased during the period 2002-2006 as compared to
that of the previous period (1998-2002). However, the negative impact of adaptation
effect is a clear indication that India is not able to adjust its exports to changes in
world demand in IT hardware and Electronics Market. But it is encouraging to note
that the positive impacts of competitiveness effect of 0.1105% played a significant
role in overcoming the combined negative impacts of product specialization and
adaptation effect on Indias share in the world IT hardware and Electronics Market.
| Page No.
23
Indicator's description
Change between
2002 2006
Value Rank
Change Index
0.32%
Share in world market (%)
Relative change of world market share p.a
0.1050%
(%)
Competitiveness effect, p.a. (%)
0.0867%
0.0113%
Initial geographic specialisation, p.a. (%)
0.0049%
Initial product specialisation, p.a. (%)
0.0021%
Adaptation effect, p.a. (%)
Number of exporting countries for the
119
ranking in the sector
Average Current Index
Source: International Trade Center, Geneva (2006)
32
Change between
1998-2002
Value
Rank
0.20%
34
0.1930%
32
0.9452%
52
62
45
-0.0076%
0.0104%
-0.7550%
58
42
112
114
42
37
| Page No.
24
China
708.00
1.44
50.35
3.90
2.90
448.20
29.80
3.60
5.00
3.80
499.40
241.10
258.30
40.90
91.00
57.40
72.50
10.10
3.96
3.50
5.28
90.90
6.35
72.50
19.10
3.80
2.10
4.20
3.50
3.50
in a particular
| Page No.
25
Table 4.5: Market and Production Rankings in the world: India Vs China
Sector
Production
Market
India
China
India
China
Rank
Rank/Share (%) Rank
Rank/Share (%)
EDP
27
2
(16.0)
27
3
(10.5)
Office Equipment
18
2
(17.6
21
5
(5.4)
Control &
21
8
(2.4)
22
3
(7.0)
Instrumentation
Medical & Industrial
Radio communication
(incl. Mobile phones)
Telecommunications
Consumer Electronics
Electronic
Components
Total
26
23
4
4
(3.5)
(7.1)
22
25
4
4
(5.4
(5.4)
27
13
26
3
1
3
(9.0)
(21.8)
(8.3)
26
11
27
3
2
2
(7.9)
(8.9)
(17.3)
29
3
(11.1)
26
3
Source: Yearbook of World Electronics Data 2004/05, Vol 2 & Vol 3
(10.8)
But when it comes to performance in production or market share China is much ahead
of India (Table 4.5). This clearly hints that there are some critical factors other than
the level of ICT development, which has enabled China to have a competitive edge
over India.
The answer to the mystery of Chinas success in IT hardware and Electronics market
lies in its large domestic consumption led by the Government itself, unique package
of investment and tax incentives, high competition among the local Governments for
attracting hardware industry related investments, high investments in infrastructure
sector, flexible labour laws and linking of access to domestic market with condition of
local manufacturing (Fifth Report of Standing Committee on IT, 2004-2005).
| Page No.
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Govt.
Efficiency
Strengths
Relocation of R&D facilities is not a threat to
the future of your economy (survey)
Relocation of production is not a threat to the
future of your economy (survey)
Real GDP Growth Percentage Change, based
on national currency in constant prices
Real GDP growth per capita percentage
change based on national currency in constant
prices
Relocation of services is not a threat to the
future of your economy (survey)
Consumption tax rate Standard rate of
VAT/GST
Ageing of society is not a burden for economic
development (survey)
Collected Total Tax Revenue Percentage of
GDP
Central government foreign debt percentage of
GDP
Business
Efficiency
Infrastructure
Weaknesses
GDP (PPP) per capita Estimates : US$
per capita at purchasing power parity
GDP per capita US$ per capita
Export of goods (% of GDP)
Employment percentage of population
| Page No.
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Against this background, the present study attempts to identify the factors that are
either facilitating or hindering the competitiveness of the Indian IT Hardware and
Electronics Sector with the help of Porters diamond model.
4.4.1 Factor Analysis
The factor condition is analyzed through the contribution of various factor
endowments like natural resource, human resource, physical infrastructure,
technology and capital resource towards competitiveness of this sector.
Raw Material Availability: The manufacturing of Electronics and IT hardware
sector in India is mainly dependent on imports of raw materials. It is clear from table
4.7 that raw material import as a percentage of raw materials purchased in the
electronics industry has remained stagnant during the last one and half decade. It
increased from 36.4% in 2001-02 to 37.7% in 2007-08. The high level of dependence
on import of raw material is making the Indian products less competitive in the
international market. Further, the rising Inflation in the domestic economy is also
affecting the sector adversely.
Table 4.7 : Raw Material Import and Purchase
Transaction
(%)
(Raw material
Imports) /
(Raw material
purchase)
Segment
Electronics
Industry (Total)
Consumer
Electronics
Computer
peripherals and
storage devices
Communication
Equipment
2001 2002
-02
-03
36.4 34.9
2003 2004
-04
-05
35.2 37.4
27.3
32.2
30.7
30.3
28.9
28.6
23.5
59.2
52.3
52.7
58.2
66.1
61.9
67.7
50.6
50.0
46.5
65.0
65.6
55.6
41.6
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analysis. At present, Indias educational system is not fully equipped like US,
Singapore and Australia who have already started designing their course/training
curriculums according to the specific needs of the Industry.
Physical Infrastructure: The inadequacy of infrastructure Viz., roads, ports, high
cost of electricity etc., is a deterring the productivity and competitiveness of Indian
economy. The impact is more pronounced in case of the IT manufacturing industry
due to very high rate of obsolescence. While significant progress has been made in
improving the Turn-Around-Time (TAT), yet it needs to be streamlined to the
international levels of 15-20 mins as compared to a day or two in India
Technology: Lack of technology is one of the most important factors leading to low
level of competitiveness in Indian electronics and IT hardware industry. Technical
Research and Development in India is negligible. As a result, Indian Electronics and
IT hardware manufacturing is dependant on technical know-how of advanced
countries like USA, Germany and Japan. In addition to this, capital equipment
procured by an Indian company remains under utilized due to the low volume of
production and firms many a times fail to recover even the cost of the machinery.
Moreover, in advanced countries, continuous innovations are leading to rapid changes
in technology that give a competitive advantage in terms of cost, speed and quality.
But in India lack of innovations resulting in obsolescence of existing technology.
Indian Companies even find it unviable to upgrade as their initial investments are yet
to be recovered.
Quality Standards and Testing Facilities: In electronic and IT hardware sector,
there is a rapid change in technology and the product life cycle is getting shorter.
Hence, proper care needs to be taken to ensure that the new products meet quality
standards and also prevent dumping of low quality products into the country.
Capital Resources Availability: In India, electrical equipment sector attracts the
highest cumulative FDIs, followed by services and telecommunication. The total
inflow of FDI in Indian Electrical Equipment (including Electronics and Computer
Software) sector has increased from Rs 2441 crore in 2004-05 to Rs.7329 crores in
2008-09 (Table 4.8). The cumulative inflow of FDI into this sector stood at Rs 30760
crores.
Table 4.8: FDI inflows in Electrical Equipment
(Including Electronics and Computer Software)
Year
FDI inflow
(Rs in crore)
2004-05
2,441
2005-06
6,172
2006-07
11,786
2007-08
5623
2008-09
7329
Cumulative inflows
30,760
Source: Economic Survey 2008-09
National Productivity Council, New Delhi
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Growth (%)
| Page No.
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Characteristics
Electronics
Industry
Total)
2001
-02
2002 2003 2004 2005 2006 2007-03 -04 -05 -06 -07
08
44.8
1.1
8.2
4.9
42.9
1.3
7.8
5.7
40.4
1.2
7.5
6.4
41.2
1.0
7.2
6.9
41.7
1.0
6.9
6.8
38.1
1.0
6.8
4.7
11.1
9.8
9.2
6.5
7.7
16.8 15.4
48.0
0.5
3.8
9.0
48.1
0.6
3.2
10.2
44.4
0.6
3.0
10.9
42.9
0.6
3.1
11.2
41.7
0.6
3.6
11.0
38.9
0.7
3.6
8.1
11.4
32.8
0.8
6.4
2.3
33.5
1.2
5.9
2.5
40.5
1.5
6.7
2.7
37.7
1.6
6.9
2.6
17.1
7.4
10.6 12.0
44.8
0.9
13.5
1.6
32.7
0.9
14.4
2.4
32.7
0.9
15.0
2.8
40.4
0.7
12.9
3.2
28.3
0.4
8.5
2.3
8.0
4.2
29.6
1.2
5.1
2.2
36.7
1.3
6.2
2.8
32.1
0.7
15.8
3.5
33.7
1.0
6.6
3.4
39.5
0.8
3.1
5.9
16.4
0.9
4.0
1.5
34.2
0.6
12.4
3.6
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the computer hardware segment had displayed better performance in this regard. One
of the main reasons for existence of low or fluctuating profit in this sector is high cost
of raw materials, which, in turn, due to higher dependence on imported raw materials.
4.4.4 Domestic Market Analysis
In the last decade, there has been a positive growth in the market size of almost all
electronics and IT hardware products and this is expected to provide the necessary
impetus to growth in production. Among various electronics products, the fast
growing segments are colour TV, DVD players and home theatre systems. The
buoyant mood in IT Hardware consumption in 2007-08 was led by significant growth
in notebook sales (180%). Consumption of desktops, however, grew by 8 per cent and
PC sales are projected to cross 6.5 million units.
Table 4.11: Market Size of each segment of the Electronics and IT
Hardware Sector
(Value in Rs Crore)
Electronics and IT
2005-06
Hardware Industry
Computers and its peripherals 5450
6967.2
2237
6773.4
8112.3
90.43
19.76
Dry Cells
1415.9
1642.9
1579.1
5.60
-3.88
Storage Battery
3370.7
4760.7
7859.7
52.70
65.09
Audio Equipment
1369.3
2241.7
2682.2
39.95
19.65
4973.9
6297.5
8655.6
31.91
37.44
Refrigerators
3673.9
4015.9
4411.0
9.57
9.83
Washing Machines
2347.5
2545.4
2996.9
12.98
17.73
Television Receivers
Watches and Clocks
9872.8
1078.5
10720.3
1332.6
11351.8
1488.7
7.22
17.48
5.89
11.71
Telephone Instruments
2006-07
2007-08
Table 4.11 shows the market size, which is estimated as sales plus the value of
imports for various Electronics and IT Hardware products. The high growth (around
15 % during 1994-95 to 2007-08) in the market size of computer and its peripherals
may be attributed to increased consumption by industry verticals such as Telecom,
Banking and Financial Services, Manufacturing, Education, Retail, IT-enabled
services (BPO & KPO) and e-Governance initiatives of both Cental and State
Governments. The downward trend in pricing, made possible by improved
technology, has further contributed to the growth domestic PC market.
During the period 1994-95 to 2007-08, there is a positive growth in the domestic
consumption of most of the electronics and IT products. Maximum growth is noticed
in case of telephone instruments, followed by air-conditioning equipment (Table
4.12). The growth in the telephone market may be attributed to the privatization of the
telecom sector where as the growth in air-conditioning market is due to the rising
purchasing power among the urban population.
National Productivity Council, New Delhi
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2005-06
2006-07
2007-08
6758.2
7413.8
18.67
9.70
Telephone Instruments
2215.9
6744.0
7990.9
89.89
18.48
Dry Cells
Storage Battery
1390.1
3190.5
1615.1
4523.6
1539.9
7556.1
5.25
53.89
-4.65
67.03
Audio Equipment
Air conditioning Equipment
Refrigerators
Washing Machines
Television Receivers
52.00
32.39
6.87
14.45
7.59
27.35
37.75
7.01
17.90
6.32
879.9
21.47
14.74
1131.6
1298.4
CAGR
CAGR
(2005-06
(2006-07
to 2007-08) to 2007-08)
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Consumer
Electronic
Control,
Data
Communication
Electronic
Strategic Electronic
Instn & Ind Processing & Broadcast
Hardware
Electronic Components
Electronic
Systems Equipment
Total
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
1211
1775
2000
3150
4500
5000
5590
4100
3410
6240
7000
7500
8250
11500
20000
15000
16972
810
1042
840
680
80
1940
910
930
60
7160
9500
14000
15150
15000
23000
30000
38850
1769
2672
3500
5610
7800
8920
12210
3920
4480
10020
18000
5500
14400
12000
10250
15000
9900
131
162
350
230
1950
3380
930
860
1100
4760
1500
5000
1650
3500
5000
6500
6250
0
43
410
140
100
400
20
100
30
10
_
_
_
_
_
_
--
1779
2061
1870
2430
4900
5080
8330
8220
8530
18250
22000
24000
37550
38000
38000
58500
61000
5700
7755
8970
12240
20230
24720
28990
19130
19610
46440
58000
56000
77000
80000
96250
125000
132972
CAGR
(19912000)
19.98
27.4
21.25
49.06
29.52
26.25
CAGR
(2000-01
to
2007-08)
15.91
26.46
-9.48
26.8522
18.5272
16.59
CAGR
(1991 to
2007-08)
17.94
27.37
11.36
27.3248
24.7232
21.76
Source: Data from 1991-1999, Guide to Electronics Industry Dept of IT & Data from 2000-01
to 2001-02 is from Dept. of IT website, 2002-03 onwards fro Annual Report (2007-08), DIT
It is an encouraging fact that the export share in total sales of electronics industry has
increased from 5.5 in 2000-01 to 8.7 in 2007-08 (Table 4.15). It is a clear indication
of the fact that the demand of Indian electronics good is increasing in the international
market. In 2007-08, export as a proportion of sales has been the maximum (15.8%)
for the other electronics segment where as that of the communication equipment
segment was minimum at only 3.5%.
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Table 4.16: Share (%) and Market Trend of top players in Computers & its
Peripherals
Sector
Industry
Computers
and its
peripherals
IT Hardware
Telephone
Instruments
Company Name
Wipro
HCL Infosystems
Compuge Infocom
Wep peripherals
Zenith Computers
PCS Technology
D-Link (India)
Priya
TVS Electronics
LG Electronics
Lipi Data Systems
Motorola India Pvt
Bharti Teletech
LG Electronics
XL Telecom & Energy
Spice Mobiles
2006-07 2007-08
21.94
30.63
32.15
28.07
4.33
8.03
4.83
4.42
6.81
4.27
4.69
4.15
4.38
3.87
2.10
2.30
2.39
2.15
2.15
1.88
1.17
`
35.28
29.46
36.24
19.15
7.27
5.16
4.97
4.85
2.14
4.48
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Table 4.17: Share (%) and Market Trend of top players in Electronics Market
Sector
Industry
Company Name
2006-07
2007-08
41.18
20.36
13.69
50.05
15.65
11.04
78.34
15.58
1.51
17.85
14.42
15.52
22.79
4.90
3.18
10.52
10.35
9.80
36.82
20.48
13.69
44.61
19.55
12.56
45.88
17.18
13.35
79.32
18.15
1.26
17.98
13.20
14.11
23.59
5.02
3.23
12.75
10.69
9.43
40.18
18.66
15.52
47.68
17.50
9.97
20.93
19.42
5.89
52.17
8.03
4.58
44.56
18.95
9.32
22.43
12.72
5.43
52.40
8.32
4.45
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The one liner by Onida Owners Pride and Neighbours Envy is a good example to
understand consumers psychology. However, there needs to be continuous R& D
leading to innovation and product differentiation based on technology. This will help
a manufacturer to become the market leader as it would be very difficult for its
competitors to replicate the product without violating IPR norms. Thus the right mix
of unique and innovative products that are acceptable to the consumers is critical to
sustain and augment profits in the long run.
Market Segmentation: In developing economies like India, manufacturers of
electronics and IT hardware products while designing and pricing their products need
to take into consideration some key determinants of demand like existing socioeconomic disparity and rural-urban divide. Market segmentation may also be done
based on purchasing power of the majority of potential customers, available
infrastructure like power supply or voltage fluctuations etc., in that particular area.
Quality & Price Discrimination: The sovereignty of consumers is quite evident
through their revealed preference in favour of economically rational decisions. The
price of the products need to be competitive but not at the cost of quality. A single
low quality product is enough to spoil the reputation of a manufacturing firm and will
result in destroying the market demand for all other products of the brand in the long
run.
However, base models of an electronic product (e.g, Mobile, watch etc) with some
key features may be placed on the shelves at lower rates than the similar available
products of the competing firms. This will help firm in capturing the market
sentiments of the Indias vast population. Simultaneously, to target the rich and elite
class, exclusive models/ products need to be designed with advanced technology.
Such products may be priced at high premium, as they would give the owner a sense
of pride.
Customer Relationship Management: Customer Management or Customer Care is
a crucial differentiator in the electronics and IT Hardware Industry. Distribution
network could be an excellent source of competitive advantage for a manufacturer of
electronics and IT hardware products. Manufacturers need to build a good after sales
service network, along with strong brand positioning, to take care of customers.
Consumer helpline should address the complaints at the earliest.
Building a Global Supply Chain Network: The competitiveness of electronics and
IT hardware industry could be enhanced only through strengthening the global supply
chain network as the industry is highly dependent on the import of raw materials. The
cost of the supply network or logistic management network also needs to be assessed
through value chain analysis. Unless it is intervened at the right time there will be a
spiraling effect (e.g., rise in price of raw materials leading to high cost of production,
that would result in either rise in product price or incurring of loss by the
manufacturer) that would hinder the competitiveness of both the product and the firm.
However, while calculating cost, the efficiency and reliability of the supply chain also
need to be considered, as most of the products require handling with care and to be
delivered in time.
National Productivity Council, New Delhi
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Skill Development: The manufacturers may sponsor either one or two centers or
some students through fellowship in the technical institutes and get them trained
according to their requirement. This may partially solve the problem of unavailability
of technical manpower.
e-waste Management: Since disposal of e-waste by individuals is not always
possible, the manufacturers need to take care of it through schemes like exchange
offer. This would help them not only in getting back the old products for scientific
disposal and creating safe environment but also help in sales promotion.
Productivity Enhancement for Raising Profit Margins: Manufacturers of
electronics and IT hardware need to take special care towards efficient utilization of
plant and machinery, reduction in waste etc. It would result in raising the productivity
level of the firms and lowering the cost of production, thereby increasing the profit
margins. A part of enhanced profit may be passed to the customers through lowering
of product prices. This would certainly make indigenous products more competitive in
the domestic market and reduce import substitution.
Contract Manufacturing/EMS: Indian entrepreneurs or companies may explore the
opportunities of functioning as Electronics manufacturing services (EMS) companies
to larger Original Equipment manufacturers (OEMs). In this case, OEMs would
provide Indian EMS with a full range of services like contract design, prototyping,
final system assembly, configuration, order fulfillment, and repair and after-market
services. Further, being part of OEMs, Indian EMS could be able to reap other
benefits such as research and product development, brand building, sales and
marketing network of OEMs.
4.4.8 Role of Government
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sector
Source: Joseph, K.J. (2005) & Ministry of Communications & Information Technology, Annual Report,
2007-08 &2008-09
4.49 Recent Policy Initiatives : To tap the full potential for growth of the hardware
industry, the Department. of IT along with National Manufacturing Competitiveness
Council (NMCC) have been taking initiatives to energize and sustain the growth of IT
Hardware manufacturing industries in India. Of course, some major steps/Policy
Initiatives (Table 4.19) have been already taken to make the Indian IT hardware and
electronics sector globally competitive.
Table 4.19: Recent Policy Initiatives
National e-Governance Plan
(NeGP)
e-Readiness
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the SEZs. For units set up outside SEZ, the incentive would be
25% of the capital expenditure plus exemption from
countervailing duty (CVD). Fab units with threshold Net
Present Value (NPV) investment of Rs. 2,500 crore would be
covered by the SIPS. For other units in the ecosystem, there
would be a threshold NPV investment of Rs. 1,000 crore. A set of
guidelines for implementation of SIPS has also been formulated
and issued on 14 September 2007.
National Knowledge Commission has recommended setting up of
National Knowledge Network
high-speed digital broadband network with adequate capabilities
and access speed to encourage sharing of resources and
collaborative research. The primary objective of the proposed
integrated National Knowledge Network is to provide gigabit
broadband connectivity to all institutions of higher learning and
research in the country. An allocation of Rs. 100 crore has been
made in the year 2008-09 for implementing the scheme.
This program aimed at pervasively spreading the benefits of eHorizontal Transfer of
Governance across the country. In the first phase, projects on
Successful e-Governance
Land records, Transport and Registration were taken.
Initiatives
This project provides a single window access to the Indian
India portal
Government at all levels from Central Government to State
Government to District Administration and Panchayats for the
Citizens, Business and Overseas Indians.
This standardization activity enables collaboration and
Standards for e-Governance
integration across various e-Governance applications.
NSDG is standards based middleware architecture which will
National e-Governance Service
facilitate interoperability and seamless data exchange amongst
Delivery Gateway (NSDG)
various government departments. NSDG will also provide a
secure and simplified interface to the external world for the
departments.
The object of this is to create a Central Database & generate UID
Unique ID Project for BPL
for residents primarily for effective reach of social sector
Families
benefits. Currently, a central database of 68.77 crore records has
been created and work is going on for a proof of concept to look
at integrating the National Population Register (NPR) and the
UID. An Empowered Group of Ministers (EGOM) approved the
creation of a UID Authority under the aegis of the Planning
Commission.
The Department taken up the initiative for setting up of
Community Information
Communication Information Centres (CICs) in the hilly, farCentres (CIC)
flung rural areas of the country to bring the benefits of ICT to the
people.
Information & Communication ICTD started with an initial funding of USD 5.0 million from
UNDP and additional Swedish International Development
Technologies for Development
Agency (SIDA) funding of USD 0.5 million.
(ICTD)
This programme seeks to provide responsive and credible
India Development Gateway
information, products and services in local languages catering to
(InDG)
the needs of rural communities.
Under this project, the Department has created 7 national
Conformance Assessment
infrastructures (region-wise) in terms of skills, knowledge and
Centres
experience with technical and legal expertise in the areas of
information Security, Software Quality, IT Service Quality,
Legal and ethical issues of web sites etc. the project is being
executed by Standardization, Testing and Quality Certification
(STQC).
Source: Annual Report (2007-08 & 2008-09), DIT, GoI
DIT prepared "A Discussion Paper on the Conceptual Policy Framework to Promote
Growth of Electronics/IT Hardware Manufacturing Industry" in consultation with the
National Productivity Council, New Delhi
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stakeholders with the objective to make the industry globally competitive, to attract
more Foreign Direct Investment (FDI) into the industry, to bring down the prices of
the end products (by bringing down the production cost and increasing volumes to
take advantage of economies of scale), to increase the demand, to compensate for
disabilities until the basic infrastructure constraints that the nation faces are removed,
and to move towards total taxation level of 12 - 15 per cent over a period of 3 years.
In order to examine the proposals/ suggestions a Task Force to promote growth of
Electronics/IT hardware manufacturing industry was set up. The recommendations
pertained to Infrastructure development, Incentives for R&D (Support to encourage
filing of international patents, Promotion of technology and innovation focused start
ups, Multiplier grants for industry sponsored research programs with premier
Academic and Government R&D institutions), Environmental considerations
(Management of E-Waste, EMC / EMI & safety standards), Tariff issues & fiscal
incentives, Special incentives to encourage investments for setting up semiconductor
fabrication & other high tech Electronics/IT products, Demand creation measures,
Promotional measures, Role of State Governments and Skill development. Based on
the recommendations of the Task Force, action has been initiated by the concerned
Ministries/ Departments to implement the same.
The salient features of the existing tariff Scheme/policy applicable to Electronics and
IT Industry are as under.
Customs
Peak rate of basic customs duty is 10%.
India is a signatory to the Information Technology Agreement (ITA-1) of the
World Trade Organization and w.e.f. 1st March 2005, the basic customs duty
on all the specified 217 tariff lines has been eliminated.
All goods required in the manufacture of ITA-1 items have been exempted
from customs duty subject to Actual user condition.
Information Technology (IT) Software is exempted from customs duty.
Customs duty on specified raw materials and inputs used for manufacture of
electronic components or optical fibers / cables is 0%.
Customs duty on specified capital goods used for manufacture of electronic
goods is 0%.
Customs duty on MP3 / MP4 / MPEG4 players is 5%.
Set top box and their major parts are exempted from basic customs duty.
Basic customs duty on project imports is 5%.
Central Excise
The general rate of excise duty (CENVAT) is 14%.
Excise duty on computers is 12%.
Microprocessors, Hard Disc Drives, Floppy Disc Drives, CD ROM Drives,
DVD Drives/DVD Writers, Flash Memory and Combo-Drives are exempted
from excise duty.
Parts, components and accessories of mobile handsets including cellular
phones are exempted from excise duty.
Excise duty on MP3 / MP4 / MPEG4 players is 8%.
Wireless data modem cards are exempted from excise duty.
National Productivity Council, New Delhi
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CHAPTER V
Field Survey Findings: IT Hardware & Electronics
5.1 Introduction
National Productivity Council conducted a field survey of IT Hardware and
Electronics manufacturing units located at different regions of the country during
March-April 2008, to find out the factors affecting the productivity and
competitiveness of the sector. The survey was carried out across 12 states namely,
Andhra Pradesh, Delhi & NCR, Gujarat, Himachal Pradesh, Maharashtra, Karnataka,
Kerala, Rajasthan, Punjab, Tamil Nadu, Uttar Pradesh, and West Bengal. The units
were personally interviewed based on structured questionnaires (Annexure 1). A
detailed analysis of the responses received from the IT hardware and electronics
manufacturers during the field survey was undertaken and the results are summarized
in the following sections.
A total 93 of IT Hardware and Electronics units co-operated with NPC survey and
their state wise distribution is shown in table 5.1. The responses against each question
have been analyzed with a view to identify the factors hindering the productivity and
competitiveness of Indian IT hardware and Electronics Sector.
Table 5.1: State wise distribution of respondents from IT Hardware & Electronics
Firms
State
Number
Andhra Pradesh
6
Delhi & NCR
18
Gujrat
12
Himachal Pradesh
14
Maharashtra
3
Karnataka
13
Kerala
1
Rajasthan
9
Punjab
4
Uttar Pradesh
11
West Bengal
2
Total
93
Source: NPC-field survey March-April 2008
Respondent
%
6.5
19.4
12.9
15.1
3.2
14.0
1.1
9.7
4.3
11.8
2.2
100.0
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Primary Business
Category
Quality Accreditation
Engaged in Export
Engaged in Import
Extent of ICT in firms
operation/production
83.9
2.2
6.5
5.4
63.4
19.4
2.2
3.2
Small
Medium
Large
Other
Yes
Yes
Yes
0-5%
5-10%
10-25%
25-50%
Above 50%
Not Applicable
0-5%
5-10%
25-50%
Above 50%
Not Applicable
No acquisition
79.3
12.0
7.6
1.0
57
41.4
38.0
9.2
6.6
1.3
1.3
18.4
63.2
5.5
1.4
15.1
1.4
76.7
95.0
Yes
Yes
Yes
47.4
30.1
13.8
Further, it is noticed from Table 5.2 that 95% of the respondents are local
manufacturers without any foreign direct investment. Particularly, large sized firms
have no foreign investment of any kind though 8 % of small and medium sized firms
have foreign partners with less than or equal to 50% ownership. This gives a clear
indication that govt should provide incentives to attract FDI or any kind of fgn
intervention in IT and Hardware industry.
The involvement of these firms in international trade is also moderate (i.e., export
41.4% and import 38.0%). Approximately 56% units export less than 50% of their
total sales. Such units include 80% of large scale firms and 53%small and medium
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sized firms. 60% of firms import less than 50%. These 60% units include all large
sized firms surveyed and half of the small and medium sized firms.
Taking an aggregate view of exports and imports it can be observed that IT Hardware
& Electronics industry doesnt have a significant contribution in trade. Also, whatever
contribution the industry has, an active role is played by small and medium sized units
as compared to large sized units.
But it is encouraging to note that 57% of the respondents have various quality
accreditations like ISO 9001:2004, ISO 9000 etc.
Less than 50 % of the firms spend on Research and Development. Only 66% of large
sized firms are involved in R&D activities. On the other hand when small and
medium sized units were observed only 46% of these firms were indulged in
R&D.(table 5.3)
Table 5.3 : Research and Development (number of manufacturing units)
Respondant
Yes
No
Total
Small
46
54
100
Medium
50
50
100
Large
66
34
100
Total
5.3 Productivity and Competitiveness
The productivity and competitiveness in case of most of the IT hardware and
electronics firms have increased during the last five years. For instance, increase in
total productivity is reported by 66% of the units surveyed where as, labour
productivity has increased for majority (74.5%) of IT hardware and electronics
manufacturers (table 5.4). This might have resulted in increasing the overall
competitiveness for 87% of the respondents.
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Increase
Total Factor
Productivity
66.0
6.0
28.0
Labour
Cost
Price
Competitiveness
Productivity
Competitiveness Competitiveness
Decrease
No Change
Extent of Increase in Productivity
74.5
10.6
14.9
87.0
8.7
4.3
82.2
7.8
10
84.7
11.8
3.5
1-5%
5-10%
10-25%
41.1
19.2
39.7
Labour Productivity
39.0
Extent of Increase in Competitiveness
26.0
33.8
1.3
1-10%
Cost Competitiveness
Price Competitiveness
48.7
48.6
10-25% 25-50%
36.8
42.9
10.5
8.6
50 % & Above
3.9
0
However, variation is noticed among the firms who experienced an increase in total
factor productivity (TFP). For instance, for 41.1% of IT hardware and electronic firms
TFP increased in the range of 1-5% while another 39.7% had 10-25% increase in
TFP. Similar variation is also seen in case of firms who had increase in labour
productivity.
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Table 5.4 shows that 80-85% of the respondents have reported an increase in both
cost competitiveness as well as price competitiveness of IT hardware and electronics
products. Further, analysis of survey data reveals that increase in cost competitiveness
and price competitiveness has been in the range of 1-10% for around 48% of the
respondents.
5.4 Employment Trend
The analysis of survey results in Table 5.5 indicates that 81% of respondents have
reported growth in salary and among them almost 50% experienced 10-25% hike in
salary. Employment has grown in 63.3% of IT hardware and electronics firms but the
extent of increase in employment varied among firms. The majority of respondents
are from small sector and increase in casualisation of labour is reported by 31.3% of
firms.
Table 5.5: Employment Trend in the IT Hardware & Electronics Firms
Respondent (%)
Response
Increase
63.3
10.0
26.7
0
Decrease
No Change
Dont Know
31.3
4.5
31.3
32.8
81.0
2.4
16.7
0
Extent of Increase
Employment
Salary
1-5%
5-10%
10-25%
28.8
13.7
37.3
30.1
25.4
49.3
8.5
6.8
%age of units
37.3
28.8
25.4
30
20
8.5
10
0
1-5%
5-10%
10-25%
25% &
Above
%age increase
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the international market has been experienced by 66.7% of the exporters. However,
among these firms there is variation in the extent of increase in export demand for
various products.
Table 5.6: Market Trend of IT Hardware and Electronics (Last Five Years)
Respondent (%)
Response
Growth in
Growth in
Export
Domestic Demand
Increase
66.7
21.4
11.9
Decrease
No Change
86.8
6.6
6.6
Profitability
(PAT)
(1991-2000)
Profitability
(PAT)
(After 2000)
74.3
4.3
21.4
74.2
10.1
15.7
1-5%
5-10%
25.0
42.9
17.9
14.2
17.3
33.3
35.8
13.6
81
42.9
%of units
40
30
25
17.9
20
14.2
10
0
1-5%
5-10%
10-25%
5-10%
10-25%
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%age of units
40
35.8
33.3
30
17.3
20
13.6
10
0
1-5%
5-10%
10-25%
5-10%
10-25%
It is encouraging to note that growing demand for Indian IT hardware and electronics
is noticed in both domestic and export market. Majority of the units (86.8%)
witnessed a growth in the domestic demand. Table 5.6 shows that domestic demand
has grown in the range of 10-25% for 35.8% of firms where as for another 33.3% of
firms domestic demand increased by 5-10%. Further, analysis of survey data reveals
that competition is intense in the domestic market and this has been admitted by
53.9% of the firms.
90% of the industry comprises of small and medium sized firms and most of these
firms have a market share of less than 10%. This observation clearly goes with the
economic assertion that larger the number of firms smaller the market share of each
firm. Most of the large sized firm have a market share above 10%.(Table 5.7 )
Table 5.7: Market Share (number of manufacturing firms)
Respondants
1-5%
5-10%
10-25%
25%&
above
Small
45
13
Medium
3
1
19 (21.34)
1
Large
Others
50 (56.17%)
11 (12.35%)
Total
Note: Figures in bracket are in percentage
Total
9 (10.11%)
71
(79.77%)
10
(11.23%)
7 (7.86%)
1 (1.12%)
89 (100%)
56% of firms in the industry have 50% and above domestic market sales to their total
sales. 56% of small and medium sized firms can be included in this category whereas
57% of large sized firm lie in this category. (Table 5.8)
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10-25%
25-50%
Small
12
Medium
10
(11.49%)
15
(17.24%)
36
5
13
(14.94%)
6
(6.89%)
43
(49.42%)
Large
Total
50-75% 75%&
above
Total
70
(80.45%)
10
(11.49%)
7
(8.04%)
87
(100%)
38
28
21.1
25
26.3
35.7
10.5
14.3
42.1
25.0
16
50.0
37.5
6.3
6.3
Analysis of survey response (Table 5.10) reveals that export of IT Hardware and
Electronics is getting hampered because of the combined impact of a number of
factors like export taxes, Inspection fee, Certification etc. But as a single factor
Inspection fee has been cited by 16.5% of the respondents as a major factor hindering
export of electronics products. Importers have reported that Import pricing scheme
and import licenses play a crucial role in determining the extent of import of IT
hardware and electronics items.
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Import
Factor
Respondent
Respondent (%)
(%)
Export Taxes
4.2
Import Pricing Scheme
27.8
Certification
8.3
Import Licenses
11.1
Inspection Fee
16.5
Import Prohibition
27.8
State Trading
12.5
Import Licenses +
Administration
Quantitative safeguards
11.6
measures
Dual Pricing Scheme
4.2
Export Taxes +
20.4
Import Licenses +
11.6
Inspection Fee
Import Prohibition
Export Taxes + Dual
4.2
Pricing Scheme
Certification +
16.7
Any Other*
11.8
State Trading
Administration
Factor
Impact
Respondent 0-10%
(No.)
10-25%
25-50%
63
15.9
66.7
17.5
61
8.2
77.0
14.8
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material in total cost of production has increased in case of 64.7% of the firms (Table
5.12). However, Indian manufactures while importing raw material could not reap the
benefit of rise in rupee as it was offset by simultaneous rise in the price of raw
material in the international market. As a result almost 30% of the IT hardware and
electronics firm end up with raw material expense contributing more than 50% of
their cost of production (Table 5.12).
Table 5.12:Change in Components Share in the Total Cost of Production
(Last Five Years)
Response
Respondent (%)
Wages & Salaries Raw Material
Increase
Decrease
No Change
73.8
7.5
18.8
64.7
16.5
18.8
Interest
Taxes
57.8
7.2
34.9
83.5
3.5
12.9
Most of the IT hardware and electronics firms (73.8) have experienced an increase in
the share of wages & salaries in the total cost of production. However, the
contribution of wages & salaries to total cost of production is 10-25% in 50.6% of
firms (Table 5.13). Fuel & energy have only 1-10% share in total production cost for
majority of firms.
Table 5.13:Analysis of Cost Components in IT Hardware and Electronics Firms
(Current)
Contribution to Total
Production Cost
Wages & Salaries
Raw Material
Fuel & Energy
Interest
Taxes
Respondent (%)
1-10%
10-25%
25-50%
50-75%
40.2
50.6
8.0
1.1
4.6
42.0
49.4
28.2
27.6
22.7
34.5
56.5
37.9
33.0
9.2
7.1
29.9
2.3
6.0
8.2
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Labour
Related
Shortage of Skilled
Manpower
Old workers in the
factory
High rate of Attrition /
Not attractive for
Young Work Force
Casualisation of labour
and lack of HR Policy
Work Environment
Machinery
Automation
Outdated Technology
New Machinery
Imported machinery
Infrastructure Power
Physical infrastructure
Space & layout
problem
Transport System
/Logistic Management
System
Distribution Network
Quality
Quality Standards
Governance/
Remark
Problem
R & D, Innovation
Taxes
Irregular Supply/interruptions
Road, Airports, Ports, Power
High Realty Price
Lack of e-Waste Management System
Inefficient /Long time in shipment
High cost
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Attitude towards
entrepreneurs/businesse
s houses
Export-Import
Procedures
Finance
Economic
Chance
factor
Rupee-dollar
conversion ratio
Inflation
Market
Unorganised Sector
Competition
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Productivity
Own R & D
Developing High end Products
Creating own Brand
Diversification/New range of Products
Following ISI standards /Ensure quality of product
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Human Resource
Infrastructure
Trade/Tax
Governance
R&D/
Technology
Raw Material
Competition
Policy Intervention
Course curriculum to suit to industrys need
Practical Training to students studying in ITI and
Diploma colleges
Parity in pay structure among different manufacturing
sectors
Modification in labour laws, making it more flexible
SEZ/ Industrial cluster /IT hardware Parks inside SEZs
Physical Infrastructure: Road, Airport & Port etc.
Information Kiosks at industrial centres
Uninterrupted power Supply
Health care/Social Security
Tax Holidays to EOU to be continued
EOUs should be allowed to procure spares for
maintenance
Single Tax Structure (VAT and CST may be combined)
Reduce delays in getting clearances at port & Airport
Single window clearance
Simplification of Procedures/ Faster Import Clearance
Efficiency /Transparency of Govt. Departments
Strengthen linkage between University-Industry
Special fund to support R & D
Technology Transfer from advanced Countries
Ancilarisation of industries with technical inputs from
bigger companies
Control Input prices (raw material & energy)
SSI should be given financial support and tax rebates
Market feasibility studies
Imports of finished products needs to be restricted
Quality Checks on imported Products
Indian grey market operations needs to be monitored
Indian brand needs Promotion/recognition.
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CHAPTER VI
ISSUES AND CONCERNS OF IT HARDWARE & ELECTRONICS
SECTOR
Creating Demand: Manufacturing of Indian Electronics and IT Hardware Industry is
still in a developing stage. Though there has been a continuous growth in demand for
the electronics products, further catalyzing domestic market development is essential
as it would encourage the local manufacturers as well as MNCs to start their
production units in India.
Shortage /Non-availability of Skilled Manpower: The Indian educational system is
not able to meet the requirement of IT hardware and Electronics sector. The course
curriculum is theoretical and in plant training of students is missing in most of the
institutes. As a result there is acute shortage of skilled manpower. Further, attrition
rate is high and salary not competitive with ITES sector.
Obsolescent technology: The manufacturing of electronics and IT hardware in India
is uncompetitive and unable to keep pace with rest of the world due to existence of
obsolescent technology, low volume of production and high costs. The gap instead
of bridging is continuously widening and it very difficult for the manufacturers to
catch up with other electronic manufacturing nations.
Cost & Price Reduction: Indian products are not able to compete with cheap
imported electronics products. The demand for electronics and IT hardware products
could be created through reduction in prices. This may be done by creating economies
of scale to reduce the cost of manufacturing and lowering the general level of taxes on
the consumer electronic products. India like china would be able to export electronic
products only through mass production.
As consumers are very price-sensitive, manufacturers of electronics and IT hardware
needs to take special care towards efficient utilization of plant and machinery,
reduction in waste etc for reducing prices of electronic products. This would certainly
make indigenous products competitive in the domestic market and reduce import
substitution. However, quality should not be comprised as a cost reduction strategy as
it would hamper the sustainability of the market share in the long run.
R&D: In India the level of R&D required for innovation and technology upgradation
is limited only to few renowned institutes like IITs, IISC etc. Moreover, these
activities are not coming out of the research laboratory due to lack of UniversityIndustry linkage. Industries need to apply R&D results for the development of the
Electronics and IT hardware industry. Fostering an ecosystem for innovation is highly
essential for enhancing the productivity and competitiveness of this sector.
Lack of Dissemination of Knowledge: The linkages between Government Agencies,
Universities, as well as Industry need to be strengthened. This will help not only in
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disseminating knowledge on existing policy and technology but will also help in
integrating strategic changes to tackle problems while evolving new policy.
Made in India is not promoted: The distributional as well as marketing networks
also not promoting Indian brands in the domestic as well as international markets.
Retailing of electronics goods need to be enhanced.
Weak Supply Chain: The production schedule meeting export market usually gets
affected as a result of delay in supply of raw material. The global supply chain
networks need to be strengthened for efficient and timely delivery of raw materials to
the production centers as well as finished products to the market.
Lack of Infrastructure: Lack of physical infrastructure like transport facility ports,
airports etc is a major hurdle to the competitiveness of the Indian Electronics and IT
hardware sector. Unless the existing infrastructure bottleneck is removed, it is not
possible to enhance the competitiveness of the sector.
Foreign Investors: Government may through policy initiatives encourage renowned
manufactures to set up their production units in India. This would be mutually
beneficial for the manufacturers as well as customers.
Taxes: Multiplicity of taxes as well as high excise tax is hindering the growth of the
sector.
Import of capital equipments under zero percent EPCG was withdrawn during the
year 2002 policy changes has adversely affected good performers Electronic Industry
Association of India (ELCINA). Electronic Component Industry is a highly capital
intensive industry and also the obsolescence is very high. The industry is competing
with major players in the countries like Taiwan, China and South Korea. Thus, there
is the imperative to upgrade machines meeting the latest technological developments.
Trade: Like any other, technology driven industry, the Electronics and IT Hardware
Industry in India is also confronted by challenges of trade related Intellectual Property
Rights, comprising of patent laws, trade links, etc.
Tax Holiday under Section 10A and 10B of the Income Tax Act is going to be
withdrawn w e f 2009-10. This withdrawal of exemption granted to EOUs will be a
huge set back. When an exemption from Income Tax could be provided to SEZ for
15 years, it should not be denied to EOUs. (ELCINA)
Presently, Duty Entitlement Pass Book (DEPB) rates for the component industry are
at varying rates and Printed Circuit Board (PCB) industry, the rate is 4%. With the
rupee being stronger, the realization is lesser which affects competitiveness
(ELCINA). The Electronics Hardware and Component Industry wants the government
to remove CST completely on its products, to help it fight global competition under a
National Productivity Council, New Delhi
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Zero Duty regime. This step for electronics hardware would surely give a boost to
investments in high value added manufacturing.
Future Scenario:
Reports released by Gartner during June 2007 to Dec 2008 give very optimistic view
of Indian IT Hardware and Electronics Sector. The world's top five mobile phone
makers have manufacturing facilities in India, and with demand for handsets set to
increase, it expected production of handsets in this country to grow at a compound
annual rate of 25% from 2006 to 2011(Gartner, June 2007).
The Indian electronics equipment market is warming up, with global players setting
up manufacturing units to cater to local demand. Gartner Dataquest believes that the
consumer and communication segments will drive growth in the industry through
2010. For global providers of electronics manufacturing services, having a local
presence in India offers twin benefits. They can take advantage of the country's
growing electronics demand, and tap into its large pool of local design talent to serve
their global clients better. The various components of the semiconductor industry
value chain are slowly beginning to gain a foothold in India. In the next five years,
two key developments will shape and define the business opportunities for global
semiconductor vendors in India (Source: http://www.gartner.com/).
Further, Gartner estimated that overall demand for electronics in this country will
amount to $75 billion in 2011 as the demand for electronic goods in India is growing
rapidly, driven by factors ranging from rising household incomes and changing digital
lifestyles to favorable government policies and economic growth. The IT professional
services market in India will record an 18.3% compound annual growth rate from
2008 through 2012. Interest levels and the pace of outsourcing have picked up
dramatically in past two years (Gartner, Dec 2008)
MAIT also quotes Gartner report India and China will lead a surge in global demand
for computer hardware in 2010. According to Gartner, companies will cut down their
spending on buying computer servers and desktops by almost 4.8% this year, with
customers in the top markets of US and Europe struggling to cope with an economic
recession. In the next two quarters, markets not impacted as badly as US and Europe
will rebound (MAIT, 2009).
Earlier ELCINA also said that In recent years the electronic industry is growing at a
brisk pace. It is currently worth $10 Billion but according to estimates, has the
potential to reach $ 40 billion by 2010. The largest segment is the consumer
electronics segment. While is largest export segment is of components
But recent global economic recession has made Industry Associations a bit doubtful
about the future growth of IT hardware and Electronics sector. The total Indian
market for domestic IT, including hardware and BPO services, clocked revenues of
around $16 billion (Rs.78,002.5 crore) for the year ended December, 2008. However,
the growth in the Indian information technology (IT) market is expected to halve this
year to 13% with top enterprises such as largest carmaker Maruti Suzuki, two-wheeler
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leader Hero Honda and top private telco Bharti Airtel looking to reduce their capital
expenditure
and
postpone
new
technology
investments.
(Source:
http://www.elcina.com/new.asp)
Similar views are given by Indian Electrical and Electronics Manufacturers
Association (IEEMA) The demand for industrial electronics products such as
AC/DC drives, SCADA, PLC, DCS etc. is reduced as the same is directly related to
the developments taking place in the core sector industries such as steel, cement,
petro-chemicals/refineries, textiles, paper mills etc. and the growth in these core
sectors continues to be low since past few years. The existing demand is mostly on the
account of process improvements in user industries. (Energy Conservation,
replacement markets etc.) Value added services such as application engineering and
software, system integration etc. are the key competence areas of the industry
(source: http://www.ieema.org/)
In this period of global recession, the demand for IT Hardware and Electronics goods
may experience a declining trend. The prevailing uncertainty about the future
employment status is resulting consumers in suppressing their desire and postpone
the purchase of new electronics goods esp., the premium brands. This lack of demand
would further result into slump in the manufacturing of IT Hardware and Electronics
good.
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CHAPTER VII
RECOMMENDATIONS
The analysis of the Indian IT hardware and Electronics Sector has revealed the major
factors hindering productivity and competitiveness of the sector. To tackle these
hindrances, and enhance the productivity and competitiveness of the IT hardware and
Electronics sector, the following recommendations are made:
7.1 Competitive Strategy for IT Hardware and Electronics Firms
In order to become competitive in the world market, IT Hardware and Electronics
firms need to formulate strategies based on market intelligence, demand forecasting
and competitive pricing of the rivals products. For a market leader this needs to be a
continuous process and an inherent part of corporate planning. However, following
strategies may serve as a guide for a startup company or relatively new market
entrant.
R&D, Innovation & Product Differentiation: A tech-savvy customer would always
like to possess electronics and IT hardware products built on latest available
technology. Hence, product differentiation is a necessary condition for
competitiveness of Electronics and IT Hardware Industry as a successful differentiator
would not only attract new customers but also invokes a competitive reaction that will
encourage others towards vertical movement in the product market.
The one liner by Onida Owners Pride and Neighbours Envy is a good example to
understand consumers psychology. However, there needs to be continuous R& D
leading to innovation and product differentiation based on technology. This will help
a manufacturer to become the market leader as it would be very difficult for its
competitors to replicate the product without violating IPR norms. Thus the right mix
of unique and innovative products that are acceptable to the consumers is critical to
sustain and augment profits in the long run. Department of IT, Government of India,
may encourage R&D activities through establishment of technology parks for the
development of IT hardware and electronics industry.
Market Segmentation: In developing economies like India, manufacturers of
electronics and IT hardware products while designing and pricing their products need
to take into consideration some key determinants of demand like existing socioeconomic disparity and rural-urban divide. Market segmentation may also be done
based on purchasing power of the majority of potential customers, available
infrastructure like power supply or voltage fluctuations etc., in that particular area.
Quality & Price Discrimination: The sovereignty of consumers is quite evident
through their revealed preference in favour of economically rational decisions. The
price of the products need to be competitive but not at the cost of quality. A single
low quality product is enough to spoil the reputation of a manufacturing firm and will
result in destroying the market demand for all other products of the brand in the long
run.
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However, base models of an electronic product (e.g, Mobile, watch etc) with some
key features may be placed on the shelves at lower rates than the similar available
products of the competing firms. This will help firm in capturing the market
sentiments of the Indias vast population. Simultaneously, to target the rich and elite
class, exclusive models/ products need to be designed with advanced technology.
Such products may be priced at high premium, as they would give the owner a sense
of pride.
Customer Relationship Management: Customer Management or Customer Care is
a crucial differentiator in the electronics and IT Hardware Industry. Distribution
network could be an excellent source of competitive advantage for a manufacturer of
electronics and IT hardware products. Manufacturers need to build a good after sales
service network, along with strong brand positioning, to take care of customers.
Consumer helpline should address the complaints at the earliest.
Building a Global Supply Chain Network: The competitiveness of electronics and
IT hardware industry could be enhanced only through strengthening the global supply
chain network as the industry is highly dependent on the import of raw materials. The
cost of the supply network or logistic management network also needs to be assessed
through value chain analysis. Unless it is intervened at the right time there will be a
spiraling effect (e.g., rise in price of raw materials leading to high cost of production,
that would result in either rise in product price or incurring of loss by the
manufacturer) that would hinder the competitiveness of both the product and the firm.
However, while calculating cost, the efficiency and reliability of the supply chain also
need to be considered, as most of the products require handling with care and to be
delivered in time.
Corporate Social Responsibility (CSR): The manufacturers of electronics and IT
hardware firms may undertake the development of human capital by adopting
institutes such as ITIs/IITs for running courses.
Skill Development : The manufacturers may sponsor either one or two centers or
some students through fellowship in the technical institutes and get them trained
according to their requirement. This may partially solve the problem of unavailability
of technical manpower. Course curriculum needs to be designed to cater to the
requirement of the industry. Ministry of HRD and Industry Associations need to take
a pro-active stand in development of such curriculum.
Productivity Enhancement for Raising Profit Margins: Manufacturers of
electronics and IT hardware need to take special care towards efficient utilization of
plant and machinery, reduction in waste etc. It would result in raising the productivity
level of the firms and lowering the cost of production, thereby increasing the profit
margins. A part of enhanced profit may be passed to the customers through lowering
of product prices. This would certainly make indigenous products more competitive in
the domestic market and reduce import substitution.
Contract Manufacturing/EMS: Indian entrepreneurs or companies may explore the
opportunities of functioning as Electronics manufacturing services (EMS) companies
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clearances which slows down completion of time bound projects as well as export
production by these units. Government should ensure hassle free import of raw
material and components by streamlining the import policy and systems and through
simplification of import procedures. Maritime Transport is a critical infrastructure for
the development of Logistics and Supply Chain Management . It influences the pace,
structure and pattern of development. Ministry of Shipping may undertake appropriate
action plans for hassle free Handling of raw material and finished products at the
ports.
The Electronics Industry is a highly capital intensive industry and also the
obsolescence is very high. The industry is competing with major players in countries
like Taiwan, China and South Korea. Thus, there is the imperative to continuously
upgrade manufacturing facilities in line with the latest technological developments.
Import of capital equipments under zero percent EPCG was withdrawn during the
year 2002. This has adversely affected the productivity and competitiveness of many
small manufacturing units.
It is recommended that the government should promote modernization of units
through a special scheme with fiscal incentives and minimum import duties. Special
Financing Schemes need to be formulated for encouraging the entrepreneurs in the IT
hardware & Electronics sector. Depending on the needs and performance of existing
manufacturers, special loans may be granted for technology upgradation,
infrastructure building or expansion of business.
7.5 R&D and Technology Up gradation
Government should strengthen Research and Development in Electronics and IT
Hardware sector especially the applied research like product development through
special grants to leading Research Institutes/Universities and Technical Institutes like
IITs. Special schemes may be formulated to promote the development of Indigenous
Technology to reduce dependence on imported equipments and components.
Development of incubators should be promoted and the linkages between
Government Agencies, Universities, as well as Industry and other stakeholders like
NGOs and industry associations needs to be strengthened. Doctoral/Post Graduate
Programmes in Electronics be made industry oriented and attractive Fellowships
should be provided to attract best talent for these programmes.
Since productivity estimations based on Labour and Total Factor Productivity Growth
rates have been found quite low in IT Hardware and electronics sector, there is a need
for substantial up gradation of skill levels and technological progress (R&D activities)
in this sector.
7.6 Implementation of Quality Standards/ Certification
Quality standards and systems are critical for ensuring the quality of electronic
products. Government needs to promote implementation of standards and
certification. Incentives may be given to small scale enterprises for getting quality
National Productivity Council, New Delhi
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REFERENCES
Annual Report (2007-08), Dept. of IT, Government of India
Annual Survey of Industries, Central Statistical Organisation, Government of India
CMIE (July 1998 & April 2009), Industry Market Size & Share, July
CMIE (July 2008 & April 2009), Industry Financial Aggregates and Ratios , March
Economist Intelligence Unit (2007), The means to compete Benchmarking IT industry
Competitiveness, July
Economic Survey (2006-07), Government of India.
ELCINA , Electronic Industries Association of India
Gartner Dataquest Insight: Mobile Phone Manufacturing, India, 2006-2011(June 2007)
Dataquest Insight: Demand for Electronic Equipment, India, 2006-2011 (Aug 2007)
International Trade Centre, Geneva (2006)
Joseph, K.J. (2005), Strategic Approach to Strengthening the International Competitiveness
in Knowledge Based Industries: Electronics Industry RIS-P#88/2005 RIS, New Delhi
Knowledge Assessment Methodology (2006) World Bank
Kumar (2006), World Electronic Component Production Scenario:An Indian Prespective
Electronics Information and Planning , Vol 33, 3 4, Dec2005-Jan-2006, Dept.of IT, GoI
Manufacturers Association for Information Technology (MAIT), 27 January 2009
www.mait.com
Market Trends: IT Services, India, 2008-2010, Gartner Report, Dec 2008
NASSCOM Delotte Report (2008)
Porter, Michael (1990), Competitive Advantages of Nations, Free Press, New York
Yearbook of World Electronics Data, 2004, Volume 2-America, Japan &Asia-Pacific, Reed
Electronics Research Ltd, England
Yearbook of World Electronics Data, 2004/2005, Volume 3-Emerging Countries & World
Summary, Reed Electronics Research Ltd, England
Eleventh Five Year Plan (2002-07), Information Technology Sector
Indian IT/ITES industry: Impacting economy and society 2007-08, NASSCOM-Deloltte
study, 2008
Fifth report of the Standing committee on Information technology (2004-2005) Fourteenth
Lok Sabha, Ministry of communications and Information technology
(Department of Information Technology)
Ministry of Communications & Information Technology, Information Technology Annual
Report 2007-08 & 2008-09, Department of Information Technology
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Annexure 1
Survey Questionnaire: Company/Manufacturing Unit
National Productivity Council is carrying out a Nation wide survey across four Manufacturing Sectors
(Food Processing, Textile & Clothing, Leather & Leather Products and Electronics & IT hardware) on
behalf of National Manufacturing Competitiveness Council (NMCC), DIPP, Ministry of Commerce and
Industry, GoI. The objective of this stakeholder survey is to identify and understand major constraints
that are hindering the growth of manufacturing sector in the path of productivity growth and export
competitiveness and to suggest Sector Specific recommendations to NMCC with a view to enhance
sectoral/manufacturing productivity and export competitiveness.
3.0
4.0
website if any:----------------------------------------------------------------
4.1
4.2
4.3
4.4
4.5
4.5.1
4.5.2
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5.0
5.0
5.1
5.1.1
5.1.2
5.2
5.3
5.4
5.5
6.0
6.1
6.2
6.2.1
6.2.2
6.3
6.3.1
6.4
6.5
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6.6
6.6.1
6.6.2
Product Description
6.6.3
Product Description
6.7
6.5.1
6.8
7.0
7.1
7.2
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7.2.1
7.2.2
7.7
8.0
8.1
8.2
8.3
8.3.1
8.3.2
8.3.3
8.3.4
8.3.5
8.3.6
8.3.7
8.3.8
8.4
8.4.1
8.4.2
8.4.3
8.4.4
8.4.5
8.4.6
8.4.7
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0.4
Identify the main factors that have affected Total Factor productivity in
your Enterprise in the last five Years (Please mention five)
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11.0
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13.0 What measures have you taken over the past five years to boost
Competitiveness in the domestic and export markets?
14.0 What are your views regarding the enhancement of Productivity and
Competitiveness in India? (Please mention)
15. Policy Interventions that are urgently required from the Government for
enhancing productivity and competitiveness of your sector (Please mention five)
1
2
3
4
5
Thank you
: -----------------------------------------------
Place of Survey
: ---------------------------Date: -----------------
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Annexure 2
List of Electronics & IT Hardware Manufacturing Units - Field Survey
Sl. No. Company Name & Address
A - Z Group of Companies, P.T. Usha Road, (Near Maharaajas College),
1
Ernakulam, Kerala
A.D. Enterprises, Plot No. E-99, GIDC Electronics State, Sector-26,
2
Gandhinagar-382028, Gujarat
3
A.L. Paul and company, Hand Kuteer, D-88, Marg-9, Saket, Delhi-110017
ABC Consultants and Engineers Parkash Kuteer, M-71 Saket, New Delhi 4
110 017
Abhishek Electronic, Distributors for ERD Range of Products, No. 85, S.P.
5
Road, Bangalore-560 002
Adobe Systems (I) Pvt.Ltd., Tower, 1-1A, City Center, Sector 25 A Noida
6
201301
AGD (India) Pvt. Ltd. , 203 NSIC STP complex Okhla Industrial Estat,New
7
Delhi
8
Ahuja Radios 215, Okhla Industrial Estate, New Delhi-110020.
9
Allied Informations System Pvt. Ltd., 133, HPSIDC, BADDI
Apex Information System Private Ltd., X - 57 Okhla Industrial Estate, New
10
Delhi - 110 020
11
Applical Electro Magnetic Pvt. Ltd., B-58, Sector 2, Noida 201 301
Arenis Soft (India) Pvt Ltd., Software Technology Park Complex, Block-1,
12
IInd Floor Sector -29, NOIDA
Ashbee Systems Pvt. Ltd., C-64, Okhla Industrial Area, Phase-I, New Delhi13
110020
Aura Systems Pvt. Ltd., D-6 Sector 6, Distt. Gautam Budha Nagar, Noida14
201 301
15
Avon Inudustries , 82/9-10, HPSIDC, Baddi
Bangalore Electronics Enterprises, Sadar Patrappa Road, Bangalore - 560
16
002
17
Bangalore Electronics, No. 124, Sadar Patrappa Road, Bangalore-560 002
Barko Electronic System Private Ltd., A-5, Sector 5 Gautam Budha Nagar,
18
Noida- 110 001
19
Beltex Engg. Services, 79, Ph.Iind. Area Pandchkula
20
Bestronix, 56 Sudershanpura Industrial Area, Jaipur-302006
Bhaskin packard Elutronics (P) Ltd.,, C-122, Industrial Area Phase VIII
21
Mohali Punjab
Bhayana El;ectronics Industries Pvt. Ltd.,-D-10/5 Okhal Industrial Area
22
Phase-I New Delhi
23
Bhurfi Super-Tek Industries Pvt. Ltd., 272, Udyog Vihar Phase -II, Gurgaun
24
Bionites Engg. Co., 26 & 27, Okhala Indst. Area, New Delhi - 20
Birla Soft Ltd., SIW Tech. Park Complex 2nd Floor Block-III, Ganga 5/WT
25
Complex Sector-29 NOIDA.
26
Caral Telecom Pvt. Ltd., C-25, Sector 7, Noida - 201 301
27
Caturia Products Ltd.E-15, Sector 8 Noida
National Productivity Council, New Delhi
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28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
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63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
Naina Solavis Ltd.,, C-37, Iind Floor, Okhla Ind. Area,Phase-1,New Delhi
Omega Electronics, 28 E & F Malviya Industrial Area, Jaipur
OSI Group, Plot No. 1 & 9 Chala palli, Hyderabad-51
Pacific Electronic & Componants, Juddi Kalan Village, Baddi Solan
Process & Machines Automation Systems, G-695, RIICO Industrial Area,
Sitapura
Promay India, 82/8 HPSSDC, Baddi, H.P.
Purohit Electron, No. 82, NGM Comples, SP Road, Bangalore 2
R.P. Infosystems Pvt. Ltd., $th Floor, Regent House 12, Govt, Place East,
Kolkata 700 069
Radetron, 27 B, Malviya Industrial Area, Jaipur - 17
Ravindranath Chnnel softech (P) Ltd., S-5, 2nd Floor, SC Road,
Seshadrputram, Bangalore 24
Rochees Watches Pvt Ltd., E-280, Road No. 14, Vishwakarma, Industrial
Area, Jaipur-302013.
Ruchi Tellcom Pvt. Ltd., F-81, Khanpur Ext., Behind DTC Bus Depot, New
Delhi- 110044
Sheth Enterprise, No. Dorpon Six Road, 5, 2nd Floor, Gitanjalee Shopping
Centre Navirengar, Ahmedabad-14
Siemenns Ltd.,Kalwa Works, Post Box No.85, Thani-Belapur Road, Thane400601, Maharashtra
Siemens Ltd., PB No. 85, Thane-Belapur Road, Thane 400601
Simoco Telecommunications (South Asia) Limited, Block EP & GP, Sector
- V, Bidhannagar, Kolkatta - 91
SM Creative Electronics Ltd., 51 Bhanlikalan, Baddi, H.P.
Soghalt Technologies by,37, DIC Industrial Area, Baddi
Sohna International, 16, 17 Jharmajri, Baddi
Soynia electronics,E-63, Phase VIII Mohal
STK Salit India Ltd., 42, 43, 44, 114 Ind. Area, Baddi
Stuti Technologies, FF/7, Smita Tower, Opp. Auda Garden, Gurukual Road,
Ahmedabad-52.
SUCAM Power System Ltd., 7 Apparel Park cum Industrial Area, Katta
Baddi
Sunrise enterprises, B-250, Industrial Area, Phase-I, Okhla, Delhi-110020.
Team Engineers Pvt., Uppal Industrial Area, Hyderabad
Timex Gror I , 10, IA, Katha Batlikalan 175 005
Electronics (India) Plot No. E-115-GIDC, Electronics Estate, Sector, 26,
Gandhi Nagar
Veeral Controls P. Ltd., B/29, GIDC Electronics Estate, Sector - 25,
Gandhinagar - 382 024
Vision Power, 182/19, Pathnam Milaya, 6th main,10th Vasanathnagar,
Bangalore 560 052
VXL Instruments Limited. House of Excellence, No. 17, Hosur Road,
Electronics City, Bdangalaore-560100.
Zulu Infotech, B-7, 3rd Floor, Dipika Tower, Opp. Amts Bus Stop. Nanda,
Ahmedabad
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Annexure - 3
Methodology Adopted for Partial and Total Factor Productivity
Estimations
Productivity can be measured in terms of both partial and total factor productivity
methods. Most commonly used partial productivity measures are Labour Productivity
and Capital Productivity estimations. The partial productivities are measured as a ratio
of Gross Value Added per worker or per unit of capital invested.
The partial productivity methodology is based on the premise ceteris paribus that
only two factor inputs used in the production process such as labour and capital.
Details regarding the data construction and estimation procedures are given as below.
A. Labour Productivity
Once the labour productivity has been calculated, we can estimate annual
labour productivity growth using the growth rate estimation formula :
Labour Productivity
Growth
100
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To calculate capital stock we have used Perpetual Inventory Method. Capital stock
has been estimated from the book value of Gross Fixed Capital compiled from the
ASI Database.
Fixed capital data from ASI for the textiles and garments sector taken for the
years 1995-2006.
The book value of fixed capital at 1995-96 is multiplied by Gross net ratio of
capital for getting initial year capital stock.
Incremental capital during the year 1996-97 at constant prices (deflated with
the machinery and machine tools prices at 1993-94 prices) is added to the initial year
capital stock of 1995-96 for getting the capital stock for 1996-97at constant prices.
Incremental capital = ((Fixed capital 1996-97 - Fixed capital 1995-96)
To calculate the capital productivity we have divided Gross Value Added at constant
prices by the estimated fixed capital. The formula used to calculate the capital
productivity is as follows:
x 100
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Where
WL + WK = 1
and
WL = Wage Share in Total Cost
WK= Capital Share in Total Cost
Total-Factor Productivity Growth Index
As in the case of Labour and capital productivity , Total Factor Productivity Growth
Index can also be constructed with the base 100 for the initial year and adding the
subsequent growth rates cumulatively to it.
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Annexure 4
Concordance between 4-Digit Level of NIC-98 & 3-Digit Level of NIC-87 for Converting
NIC-87 based data in terms of NIC-98
3000
358+367
3210
368
3220
365+396
3230
366
3330
382
ASI 98
3000
Manufacture of office, accounting and computing machinery
3210
Manufacture of electronic valves and tubes and other electronic
components
3220
Manufacture of television and radio transmitters and apparatus for line
telephony and line telegraphy
3230
Manufacture of television and radio receivers, sound or video recording or
reproducing apparatus, and associated goods
3330
Manufacture of watches and clocks
ASI 87
358
Manufacture of office, accounting and computing machinery
365
Manufacture of apparatus for radio broadcasting television transmission
366
Manufacture of TV receivers; radio telephony/video recording turn table,
record-players, cassette-players
367
Manufacture of computers & computer based systems.
368
Manufacture of electronic valves & tubes & other electronic components
nec
396
Repair of apparatus for radio-broadcasting or television transmission:
radar, radio remote telephony
382
Manufacture of watches and clocks
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