Lok Sabha Question No. 77 (STARRED), answered on 2019-06-26
Subject: Investment in Electronic and Information Technology Sector
Ministry: ELECTRONICS AND INFORMATION TECHNOLOGY
Asked by: Janardan Mishra

## GOVERNMENT OF INDIA MINISTRY OF ELECTRONICS AND INFORMATION TECHNOLOGY

## LOK SABHA STARRED QUESTION No.*77

TO BE ANSWERED ON 26.06.2019

## INVESTMENT IN ELECTRONIC AND INFORMATION TECHNOLOGY SECTOR

## *77      SHRI JANARDAN  MISHRA:

Will the Minister of Electronics and Information technology be pleased to state:

- (a) whether  there  is  a  need  to  promote  domestic  investment  in  electronics  and information technology sector in the country, if so, the details thereof:  and
- (b) the steps taken/ proposed to be taken by the Government in this regard?

## ANSWER

MINISTER OF ELECTRONICS AND INFORMATION TECHNOLOGY (SHRI RAVI SHANKAR PRASAD)

- (a) and (b):  A Statement is laid on the Table of the House.

## STATEMENT REFERRED TO IN REPLY TO LOK SABHA STARRED QUESTION NO. *77

## FOR 26.06.2019 REGARDING   INVESTMENT IN ELECTRONIC AND  INFORMATION TECHNOLOGY SECTOR

(a): Yes, Sir. The  Government  attaches  high priority to domestic electronics  hardware manufacturing  and  it  is  one  of  the  important  pillars  of  both  'Make  in  India'  and  'Digital  India' programmes of Government of India. The Electronics System Design and Manufacturing (ESDM) industry  is  of  strategic  importance  as  well.  As  a  result  of  steps  taken  by  the  Government  for promotion of electronics hardware manufacturing and efforts of the industry, domestic electronics production has increased from INR 1,90,366 crore in 2014-15 to an estimated INR 4,58,006 crore in 2018-19, at a Compound Annual Growth Rate (CAGR) of about 25% during the last four years. The import of electronic goods was of the order of USD 37.5 billion (approximately INR 2,29,275 crore) in 2014-15, which has also grown to USD 57.37 billion (approximately INR 3,98,722 crore) during 2018-19 at a CAGR of about 11% during the last four years.

As per extant Foreign Direct Investment (FDI) policy, 100% FDI is permitted under automatic route for  Information  Technology  and  Electronics  manufacturing  sector,  subject  to  applicable  laws/ regulations;  security  and  other  conditionalities.  There  has  been  a  significant  FDI  inflow  into  the computer software and hardware sector, as under:

| Year    | FDI Inflow (in INR crore)   |
|---------|-----------------------------|
| 2016-17 | 24,605                      |
| 2017-18 | 39,670                      |
| 2018-19 | 45,297                      |

The sector has further potential to increase investments.

IT-BPM sector contributes  6.6%  of  the  country's  GDP,  directly  employs  over  4.1  million  skilled work force and annually earns in  excess  of  USD  130  billion in  foreign  exchange,  with  USD  180 billion in overall revenue. It contributes over 66% of India's total services exports and attracted USD 6.4 billion FDI during 2018-19.

(b): Steps  taken  by  the  Government  for  promotion  of  domestic  electronics  manufacturing  and exports from the country are Annexed. National Policy on Electronics 2019 (NPE 2019) has been notified on 25.02.2019  with the vision to position India as a global hub for ESDM and creating an enabling environment for the industry to compete globally.

The Indian IT industry has emerged as the leader in the global competition. It has differentiated itself through quality service delivery and significant value addition to the customer's business. However, with  emergence  of  newer  technologies  e.g.,  Artificial  Intelligence  (AI),  Internet  of  Things  (IoT), Machine-to-Machine (M2M), etc., there is a need to evolve new products and services. In order to realize this, the National Policy on Software Products 2019 has been approved by the Union Cabinet on  February  28,  2019,  with  a  vision  to  create  software  product  development  eco-system,  thereby enabling Intellectual Property driven growth of IT industry.

Government  had  launched  two  BPO  promotion  schemes,  namely,  India  BPO  Promotion  Scheme (IBPS) and North East BPO Promotion Scheme (NEBPS) for promotion of investment in IT/ITeS sector and creation of employment opportunities mainly in TIER II/ III cities by incentivizing setting up of 53,300 seats BPO/ITeS operations across the country, particularly in small cities and towns. These  schemes  provide  financial  support  up  to  INR  1  lakh  per  seat  in  the  form  of  viability  gap funding. The duration of the scheme was up to 31.03.2019. Since the inception of these schemes, 287

units have been approved to set up BPO/ITeS units for a total of 52,972 seats. Out of these, 222 units have  started  operations  for  a  total  of  42,830  seats  across  26  States  and  2  UTs  of  the  country, providing direct employment to over 27,000 persons.

*******

## Annexure

## Steps  taken  by  the  Government  for  promotion  of  domestic  electronics  manufacturing  and exports from the country

- (i) Modified Special Incentive Package Scheme (M-SIPS) provides financial incentives to offset disability  and  attract  investments  in  the  electronics  manufacturing  sector.  The  scheme  was open to receive applications till 31.12.2018 for new projects as well as expansion projects.
- (ii) The  Electronics  Manufacturing  Clusters  (EMC)  Scheme  was  notified  to  provide  financial support  for  creation  of  state-of-art  infrastructure  for  electronics  manufacturing  units.  The scheme  was  open  for  receipt  of  application  for  a  period  of  5  years,  i.e.,  upto  21.10.2017. Further period of 5 years is available for disbursement of funds for the approved applicants. Under the scheme, approval has been accorded for setting up of 20 Greenfield EMCs and 3 Common Facility Centres (CFCs) in 15 States across the country.
- (iii) Tariff Structure has been rationalized to promote domestic manufacturing of electronic goods, including, inter-alia, Cellular Mobile Handsets, Televisions, Electronic Components, Set Top Boxes for TV, LED Products, Medical Electronics Equipment.  To promote domestic value addition in mobile handsets and their parts/ components manufacturing, a Phased Manufacturing  Programme  (PMP)  has  been  notified.  As  a  result,  India  has  rapidly  started attracting investments into this sector and significant manufacturing capacities have been set up in the country during the past 3 - 4 years. The manufacturing of mobile handsets and their parts/ components has been steadily moving from Semi Knocked Down (SKD) to Completely Knocked Down (SKD) level, thereby progressively increasing the domestic value addition.
- (iv) As per extant Foreign Direct Investment (FDI) policy, FDI upto 100% under the automatic route is permitted for electronic product manufacturing, subject to applicable laws/ regulations; security and other conditionalities.
- (v) For promotion of exports in the sector, Merchandise Exports from India Scheme (MEIS) and Export  Promotion  Capital  Goods  (EPCG)  Scheme  are  available  under  the  Foreign  Trade Policy, 2015-20. MEIS offers export incentives so as to offset disabilities of manufacturing. Zero  duty  EPCG  scheme  allows  import  of  capital  goods  at  zero  customs  duty,  subject  to specified export obligation.
- (vi) The import of used plant and machinery having a residual life of at least 5 years for use by the electronics manufacturing industry has been simplified through the amendment of Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016, vide Ministry of Environment, Forest and Climate Change Notification dated 11.06.2018.
- (vii) Notified capital goods for manufacture of specified electronic goods are permitted for import at 'Nil' Basic Customs Duty.
- (viii) The  Department  of  Revenue  vide  Notification  No.60/2018-Customs  dated  11.09.2018  has amended the Notification No.158/95-Customs dated 14.11.1995, relaxing the ageing restriction from 3 years to 7 years for specified electronic goods manufactured in India and reimported into India for repairs or reconditioning.
- (ix) In  order  to  ensure  safety  of  Indian  citizens  by  curbing  import  of  substandard  and  unsafe electronic  goods  into  India,  MeitY  has  notified  'Electronics  and  Information  Technology Goods (Requirement of Compulsory Registration) Order, 2012' for mandatory compliance. As  per  the  provisions  of  the  order,  the  manufacturer  has  to  get  the  product  tested  in laboratories recognized by Bureau of Indian Standards (BIS), take registration from BIS and put the registration mark on the product. 44 product categories have been notified under the order.
- (x) The National Policy on Electronics 2019 (NPE 2019) has been notified on 25.02.2019. The vision of NPE 2019 is to position India as a global hub for Electronics System Design and

Manufacturing (ESDM) by encouraging and driving capabilities in the country for developing core components, including chipsets, and creating an enabling environment for the industry to compete globally.

## Promotion of Innovation and R&D

- (xi) Electronics Development Fund (EDF) has been set up as a 'Fund of Funds' to participate in professionally  managed  'Daughter  Funds'  which  in  turn  will  provide  risk  capital  to companies  developing  new  technologies  in  the  area  of  electronics,  nano-electronics  and Information Technology (IT). This fund is expected to foster R&D and innovation in these technology sectors.
- (xii) Ministry of Electronics and Information Technology (MeitY) provides grant-in-aid support to institutes  of  higher learning like  IITs,  IISc,  Central Universities and R&D Organizations to conduct research in identified thrust areas. These research programmes are aimed to deliver proof of concept, technology/ product development and transfer of technology. During the last few  years,  several  research  initiatives  have  been  taken  in  these  areas.  These  research programmes also result in generation of specialized manpower to support 'Make in India'.
- (xiii) Indian Conditional Access System (iCAS) has been developed in Public-Private Partnership (PPP)  mode to  promote  indigenous  manufacturing  of  Set Top  Boxes (STBs). The  iCAS  is available to domestic STB manufacturers at a price of USD 0.5 per license for a period of three years, as against market price of USD 3-5 per license for other competing products. The implementation of iCAS in the cable networks is underway.
- (xiv) An  Electropreneur  park  has  been  set  up  in  New  Delhi  for  providing  incubation  for development of ESDM sector which will contribute IP creation and Product Development in the sector.
- (xv) National Centre of Excellence in Large Area Flexible Electronics (NCFLEX) has been set up in IIT-Kanpur with the objectives to promote R&D; Manufacturing; Ecosystem; Entrepreneurship; International Partnerships and Human Resources and develop prototypes in collaboration with industry for commercialization.
- (xvi) National Centre of Excellence for Technology on Internal Security (NCETIS) has been set up at  IIT-Bombay  with  the  objective  to  address  the  internal  security  needs  of  the  nation  on continuous  basis  by  delivering  technology  prototypes  required  for  internal  security  and  to promote domestic industry in internal security.
- (xvii) Centre for Excellence on Internet of Things (IoT) has been set up in Bengaluru, jointly with NASSCOM.
- (xviii) An Incubation centre with focus on medical electronics has been set up at IIT-Patna.
- (xix) A fabless chip design incubation centre has been set up in IIT Hyderabad to incubate start-ups in semiconductor design and to provide one-stop service to start-ups intending to enter this space.
- (xx) A    Centre  of  Excellence  (CoE)  on  FinTech  at  STPI  Chennai  has  been  set  up  to  provide infrastructure, resources, coaching/ mentorship, technology support and funding to emerging start-ups in the FinTech sector through a collaborative approach including M/s intellect design as  industrial  partner,  NPCI,  UIDAI  and  Partner  Banks  as  Yes  Bank,  PayPal,  HSBC,  IIT Chennai as knowledge partner and TiE Chennai to provide industrial connect.
- (xxi) An IoT OpenLab - a Centre of Excellence (CoE) for Internet of Things in partnership with Arrow  Electronics at  STPI  Bangalore has  been  set  up  to  provide  academic  and  business mentoring of the startups in the IoT emerging technology area for developing products and/ or services around IoT.
- (xxii) An ESDM Incubation Centre has been set up at Bhubaneswar with the objective of creating a holistic  eco-system  to  promote  ESDM  innovation,  R&D  and  create  Indian  intellectual property in the eastern region of the country.

********