Budget expectations 2022

The Indian e-commerce market is expected to grow to US$ 111.40 billion by 2025 from US$ 46.2 billion as of 2020. By 2030, it is expected to reach US$ 350 billion2. Digital continues to drive growth for the industry in domestic as well as export markets.

Key trends and growth areas include electronics manufacturing services, semiconductor technology and manufacturing, 5G and private networks, internet services, including e-commerce and consumer-oriented services like ed-tech, health-tech, OTT media, online gaming, etc.

Expectations -

Top four asks:

Expectation #1. Creating advanced manufacturing jobs, the semiconductor solution

• With accelerated digitisation likely to continue in the post-COVID-19 world, the demand for semiconductors will only increase in the coming years, with new 5G telecom networks, cutting-edge smartphones, IoTs, etc., driving the growth.
• India’s position as second-largest mobile phone manufacturer worldwide and surge in internet penetration rate has spiked the demand for electronic products and created a strong electronics manufacturing ecosystem across the country.
• India also has demonstrated capabilities and talent ecosystem in semiconductor design services, with several large global semiconductor OEMs establishing their offshore design and engineering base in India.
• The Union Cabinet in December 2021 approved INR 76,000 crore scheme to boost semiconductor and display manufacturing in the country. Also, under the chips to startups programme, India aims to create 85,000 engineers to help India achieve its ambition of becoming a semiconductor powerhouse.
• While this initiative may ameliorate the situation in the medium term, this is even better in the long term as this would spur the semiconductor manufacturing segment, providing opportunities both for import substitution and export propulsion.
• This initiative could also herald an end-to-end presence from fab to box for India in the electronics value chain, and in the long run, we could also have large domestic corporations actively participate in this segment.
• Now, it is imperative that we follow up the budgetary allocations and ease macro factors such as ease of doing business, enhancing the seamless import-export ecosystem for this segment, etc., which will pave the way for a robust semiconductor fabrication ecosystem in the country, and create advanced manufacturing jobs.

Expectation #2. Electronics, Made in India

• India currently accounts for less than 2% of the global electronics production. It is observed that even though India’s share of global electronics production is higher than other Asian peers such as Thailand, Malaysia, Vietnam, and Philippines, India accounts for only 0.2% of global share of electronics exports, falling below the aforementioned peers in Asia. This shows that majority of India’s production of electronics is serving the domestic demand and not catering to the export market.
• Government policies and investments have created a favourable environment for Electronics Manufacturing Services (EMS), especially schemes like Production Linked Incentive Scheme (PLI), Scheme for Promotion of Manufacturing of Components and Semiconductors (SPECS), and Electronics Manufacturing Cluster Scheme (EMC 2.0) which are supporting the development of infrastructure and common facilities for electronics production.
• Building on the success of large-scale electronics product assembly, it is imperative to extend the value chain and create a robust ecosystem for component design and manufacturing, bringing higher domestic value addition.
• Also, improving the export ecosystem for electronics products, including Free Trade Agreements (FTA) with large economies, improving the ease of doing business parameters, especially related to cross border trade, and supporting domestic R&D and skill development will help make India a global hub for electronic products.

Expectation #3. 5G, and the future of communications

• 5G technology is bringing a disruption and reshaping the communications value chain.
• 5G networks feature lower latency, higher capacity, and increased bandwidth compared with 4G. Key applications include massive IOT, enhanced mobile broadband, smart city solutions, smart factories, etc.
• As of March 2021, 67 markets worldwide have commercial 5G services³.
• As more countries move towards 5G technologies, it is imperative for India to support commercial deployment of 5G networks through a combination of budgetary, policy, and regulatory support, helping startups and enterprises create new revenue opportunities through enhanced communication and connectivity mechanisms.

1. https://nasscom.in/knowledge-center/publications/technology-sector-india-2021-new-world-future-virtualstrategic-review

2. https://www.ibef.org/industry/ecommerce.aspx

3. https://www.spglobal.com/marketintelligence/en/news-insights/research/67-markets-worldwide-have-commercial-5g-services