India’s electronic imports dropped for the second continuous month in December. The drop can be attributed partially to the import duty hikes proclaimed by the government recently. But that is not the sole factor driving imports towards a decline.
According to Senior Economist at Standard Chartered Bank, Anubhuti Sahay the near-term production in automatic imports can be suggestive of slower consumption request. Consumer sentiment has declined recently.
As per another economist with a private sector bank, automatic imports swelled ahead of the festive season, but businesses fell below expectations, and this appears to have disinclined their imports in the subsequent months. Secondly, the apparent depreciation in the rupee during that time also made imports costlier, which affected demand.
In the financial year 2018, electronic goods accounted for 11.91 percent of all imports, transforming it into the third-largest contributor to India’s overall imports after gold and crude oil. On an aggregate basis in the fiscal year 2019, the percentage of electronic goods in cumulative imports stands at 11.85 percent.
As per the share wise data for November reveals that amongst electronics, imports of telecom devices fell the most, supported by consumer electronics, computer hardware peripherals, and medical and scientific instruments.
Not to mention, the latest product-wise data is not still available, some analysts assume the fall in consumer goods to be more visible this time around. As per industry experts, interactions with the analysts based in different parts of Asia imply that there is some slowdown in a request for consumer products worldwide, particularly in smartphones. So, some softness in automatic imports could be on the reverse of that. While plunging imports of electronic goods bode favorably for the current account deficit, it would present some respite to the weakening rupee only if the course sustains. The more critical worry, of course, was what the data exhibit about consumer demand for electronics.
Electronics components export increase
India’s electronics imports reached a record USD 55.6 billion in FY19, against USD 51.5 billion a year before, and outlasted the most significant driver of its trade deficit after oil, showed the newest official data. However, what gave policymakers some comfort was that electronics exports jumped as much as 39 percent to a record USD 8.9 billion last fiscal, against 12.3 percent in the previous year.
Analysts say two features stand out. First, the damaging impact of the October 2014 closedown of Nokia’s manufacturing plant in Tamil Nadu on exports is mainly offset now. Second, the nature of imports in the mobile phone segment is growing, and purchases of components from overseas for domestic assembly/manufacturing are rising at a faster speed than those of completely-built units (CBUs).
Telecom instrument imports sank almost 15 percent up to February in FY19, against a nearly 17 percent rise in the whole FY18. Telecom instruments made up for a third of the total electronics imports, followed by electronic components (28 percent), computer hardware and peripherals (16 percent), consumer electronics (9 percent), and electronic instruments (14 percent).
Within April and February 2019, exports of telecom machines (including mobile phones) jumped a massive 129 percent year-on-year to USD 2.4 billion — the largest since FY14, just before the Nokia plant closing — and emerged as the most extensive section within the electronics exports category, although such exports are still far under potential. In fact, from USD 3.06 billion in FY14, telecom instrument shipping crashed to just USD1.07 billion in FY15, principally due to the Nokia plant closure, show the DGCIS data.
As for the complete electronics imports, although the speed of rising slowed to 8 percent last fiscal from 23 percent in the previous year, in simple term, the net imports (after excluding exports) inched up to USD 46.8 billion in FY19 from USD 45.2 billion a year before, proportionately increasing overall goods trade deficit that touched USD176.4 billion last fiscal, contrasted with USD 162.1 billion in FY18.
The FY20 marks (mobile phone manufacturing of Rs 1.5 lakh crore and component manufacturing of Rs 50,000 crore) have been traversed, and that, too, a year in advance. The CBU import, which was above 75 percent, is now below 10 percent. Sub-assembly import worked up with the CBU import coming down, but even that has dropped substantially after PCBA (Printed Circuit Board Assembly) population has begun aggressively last year. Now imports of essential components have started, and that will only rise. As per experts, if the government have their focus on large-scale exports and advance towards the (export) value of USD 110 billion by 2025 only in mobile phones solely as per the National Policy on Electronics.
Within 2014 and 2017, the Indian smartphone market expanded over 37 percent in value per annum, from USD 9 billion to USD 22 billion. In the volume term, selling of smartphones rose from 70 million units in 2014 to 150 million units in 2017. According to the report, the substantial growth seen between 2014 and 2017 is beginning to slow down, however, with the projected growth rate (in volumes) of 14 percent per annum (between 2018 and 2021) being approximately half the previous growth rate.
Indian electronics market
Recently, the India Electronics and Semiconductor Association (IESA) announced that country’s electronics market is estimated to become USD 1 trillion by 2028 while as many as 147 mobile phone companies have commenced their production locally. As per statistics provided by IESA chairman Anil Kumar Muniswamy, India’s electronic market is assumed to reach to USD 600 billion by 2026, and USD 1 trillion by 2028 as per updated figure submitted to the government. He also appended that 147 mobile handset makers had started manufacturing works in the country with 1 billion devices already shipped. The Bangaluru-based association that represents 300 organizations including 70 startups announced that electronic components like chipsets remain to be imported principally from China and Taiwan. The area, according to Muniswamy, is currently providing USD 120 billion annually.