View from India: IT hardware producers get market support

The IT hardware industry is expected to get a boost as the Production Linked Incentive Scheme 2.0 is approved.

The Union Cabinet has set aside a budgetary outlay of 17,000 crore rupees (£1.65bn) for the second iteration of the scheme for this sector. IT hardware includes laptops, tablets, all-in-one PCs, servers and ultra-small form factor devices.

Ashwini Vaishnaw, the Union Minister for IT and Telecom, has announced that the PLI 2.0 is expected to create 75,000 direct jobs along with over 2,00,000 indirect jobs, significantly increasing employment opportunities in the sector. Vaishnaw has indicated that companies like Dell, HP, Acer and Asus are looking at India.

Announced last week, the PLI scheme 2.0 could also generate exports and contribute towards forex (foreign exchange). A multiplier effect is that allied industries such as software development, e-commerce and logistics-supply chain-vendors could also benefit from the budgetary allocation for IT hardware.

A growing demand for computer hardware and peripherals has put the spotlight on IT hardware. E-commerce buyers and sellers and proliferation of the internet into rural India are other factors. Even if they are not educated, almost everyone would like to be digitally connected. This by itself has created a domestic demand for the local manufacturing and supply of IT hardware products and services.

Also, IT hardware supports functions such as input, processing and output. The new scheme could be an opportunity for the growth of specialised AI hardware. This is required to store and manage vast amounts of data, which could come from 5G devices and applications. Semiconductor companies could leverage AI hardware to improve the demand for chips. This may even open out avenues for new tech tools.

Now with the government announcement, IT hardware could get a further impetus. The expected incremental production of IT hardware is 3.35 lakh crore rupees (Rs 3.35tn, £32.5bn) and the incremental investment is projected to be Rs 2,430 crore (£236m). Perhaps it’s because the country has established itself as a trusted supply chain partner for global companies. That’s why IT hardware companies of global repute have shown keen interest in establishing manufacturing facilities in India. Investments in electronics manufacturing is awaited. All this could improve economic growth. It could propel the digital economy of the country towards being $1 trillion by 2025. It could reinforce India’s goal to achieve $300bn- worth of electronics manufacturing and exports by 2025-2026.

Colloquially we tend to talk of the right time to embark on new projects. Well then, PLI 2.0 has been announced just when 5G is being rolled out commercially. IoT devices and Smart applications are growth drivers for the electronics industry. Statistics indicate that electronics manufacturing in India has witnessed a consistent growth, with 17 per cent CAGR (compounded annual growth rate) in last eight years. This year it crossed a major benchmark in production with 105 billion USD. The latest incentive scheme could be a game-changer. It would be nice if IT hardware along with its products become accessible and affordable.

To put things in perspective, the PLI scheme for Large Scale Electronics Manufacturing was launched in 2020 and the focus was then on mobile phones and specific electronics components. Despite the pandemic, the last three years has seen the ecosystem of the electronics industry strengthen. Apart from that, India has emerged as the world’s second-largest manufacturer of mobile phones in terms of volume. The PLI 2.0 Scheme for IT hardware is for a duration of six years. Let’s hope it rings in success like the PLI scheme for mobile phones. Make in India and Make for the World.

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