• The Indian ESDM industry was estimated to be worth USD 68.31 Billion in 2012 and is anticipated to be worth USD 94.2 Billion by 2015 with a CAGR of 9.88% between 2011-15.
• The sector comprises Electronic Products, Electronic Components, Semiconductor Design and Electronics Manufacturing Services (EMS).
• Top 10 electronic products by total revenue: mobile phones, flat panel display TVs, notebooks, desktops, digital cameras, inverters / UPS, memory cards/USB drives, EMS/LCD monitors and servers.

GROWTH DRIVERS

PROVISIONS OF THE 2O14-2O15 UNION BUDGET :

• Basic customs duty on LCD and LED TV panels below 19 inches is being reduced from 10% to NIL.
• Basic customs duty is being exempted on specified parts of LCD and LED panels for TVs.
• Basic customs duty on colour picture tubes for manufacture of cathode ray TVs is being reduced from 10% to NIL.
• Special additional duty on all imports/components used in the manufacture of personal computers is being exempted.
• Education cess and secondary and higher education cess is being levied on imported electronic products.
• Full exemption from SAD is being provided on specified inputs i.e. PVC sheets and ribbon used in the manufacture of smart cards.
• Basic customs duty is being reduced from 7.5% to nil on e-book readers.
• Either of the following two deductions can be availed:

1. Investment allowance (additional depreciation) at the rate of 15% to manufacturing companies that invest more than INR 1 Billion in plant and machinery acquired and installed between 01.04.2013 to 31.03.2015 provided the aggregate amount of investment in new P&M during the said period exceeds INR 1 Billion.
2. In order to provide a further fillip to companies engaged in the manufacture of an article or thing, the said benefit of an additional deduction of 15% of cost of new P&M, exceeding INR 250 Million which is acquired and installed during any previous year, until 31.3.2017.

• Under the existing provisions of Section 35 AD of the Act, investment- linked tax incentive is available by way of allowing deduction of the whole of any expenditure of a capital nature (other than expenditure on land, goodwill and financial investments) incurred wholly and exclusively for purposes of the “specified business” during the previous year in which such expenditure is incurred.
• In order to promote investment in new sectors few more businesses have been added under the above section.
• Setting up and operating a semiconductor wafer fabrication manufacturing unit, if such a unit is notified by the board in accordance with the prescribed guidelines.
• The above business shall begin operations on or after 01.04.2014.
• It has also been decided to provide for a lock-in period of 8 years for use of assets in respect whereof a deduction under Section 35 AD has been claimed.

MODIFIED SIPS :

• Capital subsidy up to 20-25% for 10 years on capex.
• Reimbursement of CVD/excise for capital equipment in non-SEZ units.
• Reimbursement of central taxes and duties for 10 years in select high tech units like fabs and ATMPs.
• Available for the entire value chain of identified electronics products.
• Incentives available for 10 years from the date of approval.

PREFERENTIAL MARKET ACCESS :

• Preference to domestically manufactured electronics goods in government procurement.
• Extent of government procurement from domestic manufacturers will not be less than 30% of the total procurement.

ELECTRONIC MANUFACTURING CLUSTERS :

• Subsidy of 50-75% – up to USD 10 Million per 100 acres of land.
• Applicable to both greenfield and brownfield projects.

EXPORT INCENTIVES :

• Focus product scheme – 2% duty credit scrip.
• Special focus product scheme – 5% duty credit scrip.

AREAS BASED INCENTIVES :

• Incentives for units in SEZ/NIMZ as specified in respective acts or the setting up of projects in special areas such as the North-east, Jammu & Kashmir, Himachal Pradesh & Uttarakhand.
• National Scheme for Supporting MSMEs in the ESDM sector.
• For compliance of electronic goods with Indian Standards, both testing and certification are required for exports.
• Development of Electronic Manufacturing Clusters by MSMEs.

STATE INCENTIVES :

• Apart from the above incentives, India offers additional incentives for industrial projects, while some states offer separate policies for this sector.

INVESTMENT OPPORTUNITIES