The Indian electronics industry is up in arms over the continued indifference of the government on its survival and growth prospects.
Smarting under discrimination suffered at the hands of the authorities and at the expense of its counterpart, the blue-eyed information technology industry, the electronics industry has been reeling in crisis due to recession, lack of
investments, heavy dose of taxation and onslaught of competition from unabated imports.
"It is nearly four years since the IT Task Force on Hardware Policy made far-reaching recommendations to give a boost to the electronic and components industry. One of them was the setting up of the special economic zones for the hardware sector on the lines of China.
"The Task Force was headed by present Union Finance Minister Jaswant Singh, who was then (1998-99) deputy chairman of the Planning Commission.
"Till this day, the SEZs are yet to be set up. Many of the policy recommendations have not been implemented. Rather, they are collecting dust," lamented industry representative and Electronics Today editor S Swaran.
As a result, import of electronic goods and components continue to surge, constituting 45 per cent of their total industry.
"What's more, with import tariff on raw materials being more than on finished goods, many of the original equipment manufacturers find it cheaper to import than source from the small and medium domestic players," the Mumbai-based Swaran told rediff.com in Bangalore on Thursday.
In the run-up to the Union Budget for the next fiscal year (2003-04), expectations are high among the small and medium industries as well as the small-scale industries on the duty structure for import of raw materials and capital goods, as the electronics and the component manufacturers have not been able to compete with imported goods due to thin margins, thanks to increasing cost of finance, power, transportation, labour and other taxes being levied at the state levels.
Admitting that the hardware industry lacked the kind of lobbying or clout its high-profile software industry has in the corridors of power, especially in Delhi, the nerve centre of all policy decisions, Swaran said the imbalance in the industry would have a cascading effect on the economy.
"It is not just the regulatory framework and taxation problems the electronics industry is facing. There are a host of others such as lack of an efficient infrastructure, speedy clearance of goods at customs, bottlenecks at port of call, and mass of paper work (read red-tape), which are stifling the growth of the industry. We need to address all the
issues across the board," Swaran asserted.
According to the Consortium of Electronic Industries of Karnataka president Shobhana Prakash, the Indian electronics industry has been meted a raw deal by the government in simplifying procedures, amending outdated laws and providing a level-playing field.
In stark contrast to the phenomenal growth of the software industry during the last 6-8 years, the growth of the hardware industry has been stagnant at around 10-12 per cent due to declining investments in the recent
past, except in the consumer electronics segment.
"Even in the case of exports, the trend has been negative on account of high cost of inputs, lower capacities and production volumes, high tariffs and the absence of custom bonding houses," Shobhana disclosed.
"While the government has set an ambitious target of achieving $50-billion software exports by 2008, and is doing everything to succeed, no efforts are being made to achieve the $10-billion target set for hardware exports by the same year.
"For the policy makers as well as the officials, IT means only software and that too the part of software, which fetches the precious foreign exchange by exporting the intelligent labour (read computer programmers)," Swaran affirmed.
With the hardware and the software being the two sides of the same coin, the industry is hoping against hope that the government will begin to address the serious problems plaguing the electronics industry to make up for the lost ground and keeping in view the global competition.