India has concluded its general election, resulting in the ruling BJP losing its parliamentary majority despite retaining power. As a result, the electronics components may experience slower growth due to the need for the government to seek compromises in policy-making and investment support.
According to Money Control and KNN, BNP Paribas released a report saying that although imports of finished electronics goods such as mobiles, TVs, and ACs have slowed recently, the electronics industry still heavily relies on imported components. They anticipate continued growth in the electronics manufacturing sector across the full supply chain, driven by developing domestic semiconductor capabilities and efforts to increase domestic sourcing of essential components.
Over the past decade, electronic components manufacturing in India grew at a CAGR of 13%, while the overall electronics manufacturing industry grew at a CAGR of 19%. The industry saw a significant increase from US$25 billion in fiscal 2013 (April 2012 to March 2013) to US$100 billion in fiscal 2023, driven by efforts to reduce reliance on imported finished goods. This growth rate represents 78% of the Indian electronics market.
According to BNP Paribas, the EMS industry in India is projected to more than double in size to US$55 billion, adding that driven by increased domestic consumption, investments from global EMS suppliers, and India's attractiveness, Indian EMS revenues are expected to double, achieving a 5% share of the global EMS market by fiscal 2027.
According to Business Today, Indian Prime Minister Narendra Modi, following his victory in the general elections that concluded on June 4, announced in a speech that India has become the world's second-largest smartphone producer under his administration. He also stated that the government will intensify efforts in the semiconductor and electronics production sectors.
The report quoted Anurag Awasthi, vice president of the India Electronics & Semiconductor Association (IESA), highlighting the importance of continued government support and effective policies. He said he anticipates further value creation in component manufacturing with a "product-centric" approach and approvals for wafer fab and ATMP projects.
Independent semiconductor analyst Arun Mampazhy suggests that the Indian government may increase incentives for industrial and manufacturing development. With only one wafer fab approved so far, he believes the country needs an additional 4-5 fabs. To support this, the government is considering allocating another US$10 billion or more in incentives. Additionally, with display fabs included in the scheme and companies like Sharp showing interest in investing in India, Mampazhy sees potential for one or two display fabs to receive approval.
However, as the ruling BJP did not have a landslide victory as previously expected, experts believe investments may slow down.
According to the Economic Times, A. Balasubramanian, MD & CEO of Aditya Birla Sun Life AMC, stated that while the "Make in India" initiative is likely to continue under the National Democratic Alliance government, the dynamics might change. He anticipates a potential slowdown in policy execution.
Emkay Global released a note saying that the capital expenditure cycle might slow down as India shifts slightly towards consumption instead of investment. They also mentioned that corporates might adopt a wait-and-watch approach for a few quarters, reports the Economic Times.
