Dynamics of India’s ICT dream
What is common between 1980’s and 2020? My friend is a person who keeps track of every development in the ICT sector and can recite the events in the chronological order.
He started comparing the two time periods-1980 and 2020, separated by 40 years. He started rather theatrically, distinguishing between India’s soft and hard power. The soft power he referred to, is the software power. He said that India started exporting software only in 1980’s and the initial dispatch was to the US, during Rajiv Gandhi’s time. The person, according to him, solely responsible for that was no one but Sam Pitroda, who had high level business connections in the US, where he was working, before relocating to India temporarily that time to become the friend, guide and philosopher to Rajiv Gandhi.
That was the time, the soft (software) power guided India’s history. Between then and now, India’s software exports including IT enabled services peaked from a few million dollars in 1980s’ to US$147 billion In 2020, a meteoric rise and it is still ticking.
But the pitch of the electronic historian is different. He is now talking about the hard (hardware) power of India, which he predicts, has started the upward movement from the year 2020. That is the connection that he is establishing between 1980 and 2020. In a gap of 40 years, the historian predicts that the electronics and related component sector is poised to grow at the same pace if not at a higher pitch.
The ecosystem of the hardware segment is essentially different from that of the software segment. In 2015, I recall reading an estimate that India’s hardware requirements including consumer electronics would reach the US$400 billion mark by 2020. The domestic production hovering around US$100 billion would leave a gap of US$300 billion, necessitating heavy imports. But empirical evidence indicates that the demand profile was on the higher side. There are opinions that the demand data was kept high, taunting the stakeholders to up the production to escape from an imminent foreign exchange outflow. There are also views that the demand side estimates were not kept high if one takes into account electronic items being imported, which are embedded in the capital goods and machineries. There is no precise data available for such items, which are embedded as electronic connectors, semi-assemblies in capital goods etc. It is difficult to maintain such data, substantiating the argument that the electronic goods imported into, could be higher than the official import figures reflected.
I tried to find out the present domestic production. Though I was not successful in getting the precise data, I tried to extrapolate the figures of the previous years. It is obvious that hardware production did not catch up with that of the software solutions and IT enabled services. But the software sector could not get any of these support or the government protection in its nascent stage or even later. Still it presented a remarkable growth in the last 40 years.
Can that be said about electronic hardware? Will the sector grow in the same pace and speed as that of software in the next forty years by the turn of 2060?
Among the few cardinal takeaways of the pandemic was the need for building alternative sources and support systems. The second was the realization how interconnected the world is not alone economically but socially, politically and emotionally. The pandemic taught the world leadership that no country can be in the safe zone if there are calamites and disruptions elsewhere.
The technology companies, mostly belonging to the ICT sector, will be more cautious than others while investing in China or sourcing from that country. That process has already started. The question is whether that will help India to gain from where China lost or poised to lose in the ICT sector.
Just by harping on geopolitical advantage, nothing much is going to happen to India. We have to mark our strategies and work towards achieving the target in a coordinated manner. There are many factors that may work in our favor. Foremost is the scramble of some of the global IT giants to relocate either fully or partially from China, their manufacturing establishments. Some of them have already done that, a few are in the process of doing that and a growing number of companies are contemplating vacating.
To take advantage of the ground level situation, India has to calibrate its policies. In the short and medium run India should be in the reckoning if not in the top among the China +1 syndrome that is sweeping across the world for global sourcing, particularly electronics goods. This dictum is followed by most of the ICT companies world over. They are keen to develop alternative channels for sourcing their ICT requirements, be it electronic goods, components or even micro components that go into the manufacture of components. India can fit into that scheme of things before we make solid forays into the electronic sector as the powerful manufacturing hub.
Yet, one has to understand the inner dynamics of the electronics and component sector in India. Though computer software and electronics are integral parts of the ICT sector, the dynamics of the two sectors are different. The foremost differentiation is the logistics. Software solutions are less dependent on logistics or for that matter on physical infrastructure since the data (end product) is transferred (exported) digitally. That is not the case with electronics and related segments. They need the support of the physical infrastructure like the brick and mortar sector. It only means that the growth of the electronics sector cannot happen from a vacuum. It has to have supporting systems built around that to catalyse the growth.
Also, in the electronics sector, there are many layers of players who are interdependent.
To build such a massive and complex supply chain in the short or medium term to the finesse of China, is very difficult. So to me, what could be possible for India is to focus on low hanging fruits. Let us focus on things where we can excel. For instance, one sector we could make a mark in the assembling of mobile phones. From a net importer, we have become a formidable exporter of the item. That, indeed, is a marvellous success story. But to take full advantage of the opportunity, India has to produce the sub-assemblies, components including sensors, FAB etc locally. That is what China did to become the world leader in the electronics sector. My sense is that we should also do the same to get our footprint strong and scalable not necessarily for the end products, but also for sub-assemblies and components that go into the end products. For every segment, we have to focus on the world market. That may take time and we have to be prepared to guide, empower and mentor our industry for that purpose. There lies the challenge.
Let me conclude by quoting my historian friend again, he said that it is rather fortunate that the software sector in India has come up on its own without any government support or meaningful fiscal incentives. I felt that his statement was laudable since I am told that the government has already come out with a package of US$30 billion to support the electronics hardware industry and more sops are in the pipeline. Indeed, it is a commendable track record for the software development and solution segment, where my business interest lies, to scale up the pathway without any such help. I do not know how many would recognize that trailblazing performance of the software sector. At least I take pride to be one among that lot.
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