Budget 2010-11 enables competitiveness of India's electronics hardware manufacturing

Electronics hardware manufacturing in India is lot behind other leading regions in Asia. But the growth in domestic market gives another set of opportunity for Indian electronics manufacturing industry to grow. This year's budget has provided bunch of tax initiatives to make 'Made in India' products more cost-competitive.

This year's budget has reduced basic customs duty on LCD panels from 10 per cent to 5 per cent to support indigenous production of LCD televisions. The LCD panel is must in TVs, computers and phones. The Indian electronics industry is not blessed with a local vendor to supply this key component, where as companies like Samsung and Sony who have own display manufacturing plants can sell LCD TVs at higher profit compared to Indian companies. So this policy can rejuvenate local consumer electronics companies such as Mirc and Videocon to regain the market. Again this is a temporary pain-killer solution. On long term basis, Indian consumer electronics companies should differentiate their products so that they can compete with global leaders without such tax benefits.

This is not easy for Indian companies, because its not just LCD panels lot more key components for LCD TVs are imported. The tax sops can turn negative, if the local industry turns lazy and sit on the temporary opportunity without working to improve local component manufacturing base. This is the toughest hurdle India has to scale up in manufacturing. The industry has to cautiously balance the components BOM (Bill of Materials) with both local and imported components. For the commodity type of components like PCBs, passive components and mechanical assemblies, import can be a viable solution(provided there is no local vendor). Where as high value semiconductor ICs, LCDs and such precision components need to be made locally.

Similar to tax benefit offered to TVs, this year budget has exempted CVD of 4 per cent on accessories, parts and components imported for the manufacture of mobile phones.
Now mobile phone is as consumer-product as TV and the technology is converging, prompting Indian consumer electronics companies to make both TVs and phones.

Imported Set Top Boxes (STB) now levied with 5% customs duty to support local STB manufacturers. The India based STB manufacturers should utilize this opportunity to come up with globally competitive products, if they don't scale up, this benefit will cause negative effect.

Finance Minister Pranab Mukherjee said in his budget speech "The electronic hardware industry has a strong potential for creating employment especially in the SME sector." That's great. Here where all the responsible people in the government, industry, academia and industry bodies should work in synergy to create millions of jobs for the people with no college qualifications but trained in some industry skills. Smart strategies surely create jobs. The off-grid solar power generation can in-fact become a cottage industry! Just like how the desktop computers are assembled by even an ordinary person solar lighting systems can be produced in modular form, so that an average person can assemble and sell as per the customer power requirements.