Demand for electronics soaring in India

April 16, 2013 at 2:27 PM
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NEW DELHI, April 16 (UPI) -- A top technology official in India says demand for electronics is growing so fast in the Asian nation it is nearing "non-sustainable levels."

"The problem we are facing is that the demand is growing so much that it is reaching non-sustainable levels," said Ajay Kumar, joint secretary of India's Department of Electronics and Information Technology.

India, the world's second-most populated country behind China with 1.2 billion people, is attempting to deal with the demand by using a carrot-and-stick approach to cultivate an electronics industry in India, but the results have been mixed, The New York Times reported Tuesday.

For a stick, the government has mandated that its own agencies purchase half of all laptops, digital tablets and other microchip-based devices from Indian manufacturers, the Times said.

That standard was so high, however, that it was diluted by allowing agencies to declare devices domestically built if 30 percent of their components were made in India. The rule was also stretched to allow "value added" services, such as testing, to count as a portion of the 30 percent.

"Nobody disputes India's need to build up manufacturing. Not doing so would be fiscally irresponsible," said Gaurav Verma, director of the New York office of the U.S.-India Business Council.

However, he said, "The government needs to not mandate this, but create an ecosystem."

The carrot end of the government's strategy includes about $2.75 billion in enticements the government is using to lure electronics manufacturers to India.

India, however, has not set up a supply-line infrastructure that can support manufacturing as easily as places like China that have a several-decade head start in establishing a manufacturing base.

Dell Inc. considered the option of building computers in India. "They flew in suppliers from China and Taiwan to see if they could set up facilities ... [but] the market is too small and logistically it is a nightmare," an industry official who asked to remain anonymous told the Times.

The cost to India is substantial. A government task force said the bill for imported electronics would exceed the bill for oil imports by 2020.

The country shelled out $8.2 billion for foreign semiconductors in 2012 alone, the Times said. At the same time, demand is growing in leaps and bounds -- at a rate of 20 percent per year, the Department of Electronics and Information Technology said.

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