NEW DELHI: India’s decade-old electronics industry is poised to grow nearly three times faster than its larger IT services sector over the next five years. By 2030, both industries are expected to generate $500 billion each, contributing to a $1 trillion digital economy.
The electronics sector, which ended last year with $125 billion in revenue, is expected to grow at a compounded rate of 32%, according to a senior official at the Ministry of Electronics and Information Technology (Meity). The IT services industry, which recorded $283 billion in revenue, is projected to grow at 12% annually to reach the same milestone.
“I don’t think electronics as an industry is larger than IT services, and given that it is newer, it is still likely a little shorter than IT and IT-enabled services,” said S Krishnan, secretary at Meity, in an interview with Mint. “That said, our goal is to enable both the industries to grow quite rapidly, so that by 2030, India will generate $1 trillion in revenue from the digital economy—with electronics and IT both contributing about $500 billion each by the end of this decade.”
Electronics gains momentum
The electronics industry received a boost after the government began providing financial assistance in April 2020 for assembling mobile phones and other electronic goods. Since then, the sector has spawned over half a dozen listed firms, a dozen private companies, and a few foreign players, including Taiwanese giant Foxconn, which have either set up new units or expanded existing ones to assemble imported components.
Four of the largest listed electronic component makers—Dixon Technologies, Amber Enterprises, Kaynes Technology, and Syrma SGS—reported $6.1 billion in revenue last fiscal. Privately-held Tata Electronics ended with $7.4 billion in revenue.
“India is now among the most favoured destinations across the world for the global electronics supply chain, from a geopolitical standpoint,” said Ankush Wadhera, managing director and partner at consultancy firm, Boston Consulting Group. “With recent tailwinds provided by attractive policy support and swift decision-making both by the Centre and states alike, several companies are asking internally what their India strategy should be, and how they should look to diversify beyond facilities in China, Taiwan, Malaysia, Thailand and Vietnam.”
“Further, with Meity’s ECMS initiative, the Centre is now offering incentives to manufacture electronics components locally, and large global firms are likely to ramp up manufacturing in India. This will increase revenue substantially in the long run—as a natural recourse to the slowdown that IT services may see in the future due to AI-led automation,” Wadhera added.
Employment, margins, and the road ahead
Despite the growth, electronics players remain smaller than IT firms. The IT industry employs 5.8 million people, while the electronics sector has 2.5 million. Salaries also lag: Data sourced by Mint from employment services firm Xpheno showed electronics engineers earn an average of ₹1.8 lakh per year, compared with ₹3.5 lakh in IT services.
Margins are wafer thin. Tata Electronics, which posted ₹66,601 crore in revenue, ended with ₹69 crore in losses. In contrast, Tata Consultancy Services (TCS), the crown jewel of the Tata Group, generated free cash flow of ₹46,450 crore.
Things may improve as Meity’s Electronics Components Manufacturing Scheme (ECMS), implemented through 2025, encourages local production of individual phone and computer components. This initiative will enable Tata Electronics, Foxconn, Dixon, and others to move up the value chain—employ more engineers, and eventually offer higher-paid positions.
“We should be clear that electronics manufacturing factory jobs are low salary vis-a-vis other tech factories where the sophistication of jobs is high. They will eventually come to India too, but that will take some time as the industry matures. But at the same time, it’s important to understand that electronics jobs are not low salary vis-a-vis employment in agriculture. The wages being offered right now are market-clearing wages—the workers are given housing, due employee protection, and in an opportunity that did not exist before,” Krishnan added.
Ajai Chowdhry, cofounder of HCL and founder of electronics industry body Epic Foundation, said India should channel government incentives into local industrial champions to reduce dependency on cross-border relations.
“We are seeing electronics continue to grow across the board thanks to great support from the Centre in components and semiconductors,” he added. “Electronics will also be a key employment generator, but that is not to say that software services firms are passé—they’re going through a small blip, but we’re seeing captive centre continue to uphold the sector, which should help it grow at a steady scale.”
