Electronics and defence production are expected to strongly accelerate the country’s economic growth engine in the coming years. Global manufacturers now find India as the most happening place as China used to be in the beginning of the current century. From just two small mobile phone manufacturing factories in less than 10 years ago, the country has already emerged as the world’s second largest mobile phone producer looking at an output target worth Rs.24 lakh crore, generating over 10 lakh jobs by 2025-26.
The production of semiconductors comes next. The Indian semiconductor market is all set to witness a stellar growth reaching US$65 billion by 2026. The government expects nearly half-a-dozen global semiconductor manufacturing firms to invest in India. With over a billion users, India boasts the world’s second largest mobile phone market although the internet growth has been rather slow. Presently, the number of wireless broadband subscribers is only around 800 million. However, the market is fast changing.
Last week, US-based Micron Technology announced plans to build a two-phased semiconductor assembly and test facility in Gujarat with a total investment of $2.75 billion. Micron’s own investment will be $825 million. The rest will come from a 50 percent fiscal support from the union government and a 20 percent incentive from the state government. The plant will produce the country’s first ‘made-in-India’ chip in 18 months. Micron is the world’s fifth largest company in the realm of manufacturing semiconductors used by mobiles, laptops, servers, defence equipment, cameras, electric vehicles, trains, cars, and telecom equipment across the globe.
The highly competitive semiconductor market is mostly ruled by a select group of countries such as the US, China, South Korea, Taiwan and Japan. Now, India is seen as a rising star in the industry, endowed with a comparative edge that could potentially reshape the landscape of the global semiconductor sphere. Having a vast market potential backed by a rapidly growing population and a burgeoning middle class, India offers a huge consumer base for semiconductor products providing a strong demand driver for the industry. The country’s talent pool can propel semiconductor developments and encourage domestic chip design skills by giving a significant emphasis on skill development and innovation. The latest government incentives have enhanced the attractiveness of the Indian market for semiconductor companies.
After wasting 40 years to set up a semiconductor plant in India, the government has taken a new initiative under the Modified Semicon India Programme, effective from 1st June, to set up semiconductor fabs and display fabs in the country. Under the programme, a fiscal incentive of 50 percent of the project cost is available to companies/consortia/ joint ventures for setting up semiconductor fabs units in India of any node (including mature nodes). Similarly, a fiscal incentive of 50 percent of the project cost is available for setting up display fabs of specified technologies in the country. The semiconductor manufacturing facilities in the country will benefit both the consumer electronics and defence electronics production.
Lately, India, boasting the world’s fourth largest defence capability and the largest arms importer since 1993 (as listed by SIPRI), is attracting foreign collaborations in a wide ranging area of defence production. Among those interested in defence tie-ups with Indian ventures are from the US, France, the UK, Germany, Israel and Japan. The launch of the India-US Defence Acceleration Ecosystem (INDUS-X) is an encouraging new development in India’s growing military cooperation with global powers, barring China. GE Aerospace’s tie-up with Hindustan Aeronautics Limited (HAL) for the joint production of F414 engines may be part of the ecosystem. These engines [F414] will be used for HAL-built Tejas aircraft. INDUS-X is designed to vitalise India’s defence industrial cooperation and unlock new innovations in technology and manufacturing.
France has already expressed that it wants to be India’s “best partner” in boosting the country’s defence manufacturing efforts. It has decided to share the best technologies and equipment in sync with the growing “trust” between the two sides, French Ambassador Emmanuel Lenain had said. The French Ambassador went further to add: “I do not think any country provides India with the same level of technology. The progress is also due to the fact that we recognise that India wants to boost its strategic autonomy, wants to build its industrial base and we want to be India’s best partner in this move.” India is a big defence importer from France. Last year, France delivered the last of the 36 Rafael fighter jets, worth Euro 7.87 billion, to India which was contracted in 2015.
India is also working with Germany to find ways to develop key military platforms. India and Germany plan to build a “more symbiotic” defence relationship based on shared goals and complementarity of strength. India has invited German investments in defence corridors in Uttar Pradesh and Tamil Nadu. New Delhi’s mega plan to procure six stealth conventional submarines at a cost of around Rs 43,000 crore has further strengthened the Indo-German defence relationship. With the UK, India has formed a joint working group to bolster the defence and security partnership through industrial collaboration.
The UK recently issued its first Open General Export License (OGEL) in the Indo-Pacific region to India, shortening delivery times for defence procurement. India’s defence PSU Bharat Electronics Ltd (BEL) is reportedly working with two Japanese companies, Toshiba Corporation for Li-Ion battery technology and Jupitor Corporation for the supply of an Anti Drone Systems. Israel is already a major partner in joint manufacturing of a number of critical defence equipment.
The government has initiated a series of measures in the last few years to boost domestic defence production. The defence ministry plans to procure military equipment worth Rs.500,000 crore from the domestic industries in the next five to seven years in line with its policy of promoting indigenous defence manufacturing. The Indian armed forces are projected to spend around $130 billion in capital procurement in the next five years. The country’s ongoing expansion in the field of electronics production, including semiconductors, will provide substantial assistance to the manufacture of defence electronics.
Together, the electronics and defence industries will hopefully serve as a major economic growth driver for the country in the coming years. By 2030, India will be the world’s third largest economy and, thereafter, the world’s second largest economy by 2050. Six of the world’s seven largest economies are projected to be emerging economies in 2050, according to a PwC report. China will be No.1, followed by India, the US and Indonesia. The US could be down to third place in the global GDP rankings while the EU-27’s share of world GDP could fall below 10 percent by 2050. (IPA Service)
The post Electronics, Defence Production Will Strongly Push India’s Economic Growth first appeared on IPA Newspack.
