India can simultaneously boost its economy and break free from its dependence on China by onshoring fabrication of hardware and electronics.
India is a first mover in the space of digital public goods (DPGs), having built massive, interoperable, multi-platform technology networks collectively called India Stack to ensure that digital and financial services are accessible and affordable for its 1.39 billion citizens.Within these three vectors, India is re-engineering how 1.39 billion people emerge as fully involved techno-citizens and is one of the three continental-scale digital powers, alongside China and the US. Consequently, the country is now converging at massive requirements for world-class hardware. Sourcing for this extensive hardware demand is the next challenge. The requirement includes mobile phones, handheld devices, and other consumer electronics for 1.39 billion people, government and private office hardware procurement, cloud infrastructure, telecommunication networks, data centres for ever-increasing data localisation and storage, and industrial and strategic electronics. In addition, India’s healthcare system is on the cusp of rapid expansion and digitisation. The proposed National Health Stack will also drive these hardware requirements, along with various post-COVID-19 protocols. India also runs some of the largest school and college systems in the world. To revamp the education system integrated with technology, driven by the proposed National Educational Policy 2020, hardware requirements to provide schools, colleges, and the next generations with the latest technology and devices will shoot up. Stacking all these together amounts to a massive hardware install base over the next 10 years. It is imperative that the country forecasts, plans, and develops viable supply chains to sustain large scale procurement.
To revamp the education system integrated with technology, driven by the proposed National Educational Policy 2020, hardware requirements to provide schools, colleges, and the next generations with the latest technology and devices will shoot up.Thus far, India has primarily relied on imports for hardware technology design and supply. Electronic goods imports have grown from US $4 billion in 2000-01 to US $55.6 billion in 2018-19, at a compound annual growth rate of 15.7 percent. Meanwhile, production of electronic goods in India has doubled from US $28.7 billion in 2013-14 to US $60.2 billion in 2017-18, which includes consumer, industrial, and strategic electronics, computer hardware, mobile phones, components, and LEDs. Several policy initiatives like special economic zones, the Production Linked Incentive scheme, Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors, Public Procurement Orders preferring domestic manufacturers for government procurement and others have contributed to this production boom. India is now the second-largest mobile manufacturer globally. However, the quality and volume of electronic goods production cannot meet domestic requirements, and the trade deficit for electronic goods continues to rise. Moreover, a substantial portion of the domestic output is sub-assembly as opposed to indigenous full-stack manufacturing. As discussed above, with hardware requirements forecasted to increase rapidly, India needs an accelerated strategy to onshore full-stack development and fabrication. Apart from the economic and trade balance implications of staying dependent on other countries to meet the demand for electronics, national security is also consequential. The pandemic has exposed clearly what the world had to face sooner or later: China-centric over-dependence for manufacturing and supply chains. For India, in the digital economy, this implies a hard look at the supply of India’s hardware, telecommunication equipment, cloud infrastructure, and other vital components. While India builds its indigenous digital security nets, applications, platforms, and so on, it must also focus on owning its hardware and equipment. The threat to citizens’ digital interests isn’t eliminated unless the hardware component is native.
The pandemic has exposed clearly what the world had to face sooner or later: China-centric over-dependence for manufacturing and supply chains.The prudent move would be to fully onshore fabrication. The government must invest in and incentivise setting up more manufacturing hubs in every state. These industrial clusters and manufacturing hubs must be world-class and employ a combination of labour-intensive and mechanised strategies to produce state-of-the-art technology on par with Chinese, Korean, and American producers. The clusters must include continual upgrade and expansion strategies as requirements, protocols, and design evolve. Dedicated industrial clusters connected to markets by high-speed rail and roadways will transform India’s hardware space over the next decade. India must also invest and secure its intellectual property and research and development, and rapidly transition from last-mile and sub-assembly to full-stack design and manufacturing. The indigenous manufacturing effort can only accrue total value when accompanied by native design, not by importing IP from other economies and paying a hefty patent utilisation fee. India must own the intellectual property pipeline for hardware and equipment design. This effort entails state-of-the-art research and laboratory facilities, pilot development and testbeds, and long-term research grants for scientific development and filing of intellectual property. Retaining and incentivising the intellectual and human capital in this regard is as important as building the facilities.
The indigenous manufacturing effort can only accrue total value when accompanied by native design, not by importing IP from other economies and paying a hefty patent utilisation fee.Critical to these efforts is the availability of high-end semiconductor chips. There is currently a worldwide shortage of chips, and China leads a global race to dominate fabrication. India must enter immediately and get ahead early to develop several generations of world-class chip fabrication plants in the country. This needs a great leap forward, with extensive investment, physical infrastructure, incentivising human capital, and strategic international partnerships. Onshoring full-stack design and fabrication of hardware and electronics will ignite a tremendous force-multiplier effect for the economy. It has the capability of creating millions of jobs—both labour-intensive and specialised—as well as new opportunities for supply chains, exports, and other immensely beneficial economic activities. With the prospect of revving up India’s economic growth engines after the COVID-19-induced slowdown on its path to become a US $5-trillion economy, this multidimensional effort will foster an accelerated economic trajectory.
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Nisha Holla is Visiting Fellow at ORF where sheRead More +