Rising disposable incomes mean that India's demand for electronics is soaring, but the country needs to manufacture more goods within the country to reduce import costs and boost the economy, analysts say.
“While the government is taking steps to boost electronics production, one needs to see how quickly it ramps up - else given its size, which is now close to the oil deficit, it may be emerging as the ‘new oil’ for India,” says Kapil Gupta, an economist at Edelweiss, a financial services firm headquartered in Mumbai.
Manufacturing of electronic good in India is still relatively low and imports of electronic items are a burden on the country's trade deficit.
A study by lobby group Assocham reveals that India would need to import $300 billion of electronic products, including televisions and smartphones, by 2020 to meet demand, which is growing at a rate of more than 40 per cent a year.
"India will have hundreds of millions of consumers in each age category," says Vidya Mahambare, the senior associate professor at the Great Lakes Institute of Management in Chennai.
"Rising incomes will lead to more discretionary spending and rapidly growing consumer demand from each of these age brackets for products."
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The Indian government is focusing on developing India as a manufacturing hub through its 'Made in India' campaign, which has helped boost the production of smartphones in the country. But there is still much more that can be done.
The government has set a highly ambitious target of achieving net zero imports of electronics by boosting manufacturing. It has also increased import duties on some items including televisions and smartwatches in an effort to help the local industry.
But a major drawback is the lack of component manufacturing in India – something which India is eager to address.
“Hopefully in a couple of years’ time..... we are working hard towards this goal, we would be able to get most of the important sub-assemblies and the basic components also increasingly being manufactured in India,” said Ajay Prakash Sawhney, the secretary of the ministry of electronics and information technology, speaking at an electronics conference held in New Delhi at the end of May.
There have been some signs of progress on this front, with China's Xiaomi saying that by the current quarter it expects all its phones produced in India to have locally manufactured or assembled printed circuit boards.