In 2011, India Electronics Semiconductor Association (IESA) forecasted that by 2020 India will consume $400 billion of electronics. At present, nearly 70 percent of it gets imported which is a significant drain on the foreign exchange. This brings us to the need for developing a local manufacturing system and the ecosystem that includes the entire supply chain that goes into electronic manufacturing. Talking to Taru Bhatia, Vinay Shenoy, chairman, IESA, shares his ideas on how this can happen.
What role states play in making Make in India programme a success?
The government’s policies for manufacturing industry are progressive. For example, the MSIPS (Modified Special Incentive Package Scheme) policy where 25 percent of the capital investment is provided as grant, plus certain income tax benefits. But we notice that the ultimate incentive to work has to come from the states. So the states have to be as enthusiastic as the government in providing the support. If the central government provides 25 percent of grant but state government takes two years to provide land or high quality electricity or logistical support then it will not be going to take off. Entrepreneurs in the industry would like to implement a factory from concept groundbreaking to production in about eight-month time period. Now if there is uncertainty then it will not help. As an agency we would like to see all the states demonstrating same level of enthusiasm and formulating state-level policies and establishing infrastructure to promote manufacturing. Take for instance CM of Andhra Pradesh. He is very enthusiastic in a way that whenever an interesting manufacturing opportunity comes the company is given direct access to his office that closes the procedure quickly. So initially you have to start this way and later make the system simple because a CM cannot meet 100 companies in a month. In early stages the enthusiasm has to be reflected. Combining these efforts with the central government’s support makes India an attractive destination.
Some states have come forward...
Some states have taken the initiative through the concept of electronic manufacturing cluster. It is an area that provides significant advantage to anybody who wants to manufacture. Support such as clearances, approval, pollution control, electricity and common test measurement equipment – all the common service – are provided in a cluster, by the cluster owner. So anyone can go there to establish a factory and focus only on the establishment not worrying about licenses, approvals, etc. This makes it easier for a company to start establishing because most of them struggle with bureaucracy either because they don’t understand the system or system doesn’t understand them. These clusters are forming in various states like Madhya Pradesh, Gujarat, Maharashtra and Andhra Pradesh. Other states should follow.
What advantage India has that could help it become a valued contributor to the global manufacturing industry?
While India has been historically focusing on engineering and innovation, our neighbours like China, Korea, Taiwan actually began with manufacturing and are now aspiring to move towards services because they are high margin business. Now that Chinese companies are looking to add more value, we already have high value-added ecosystem through R&D services, now we want to go to manufacturing. So it is lot easier for us. There is an established base of engineer population in our country. There is an established base of engineer ecosystem. Now the question is, how to combine engineering capabilities of India, which is unique compared to our neighbours? Because, if we only focus on manufacturing then there are enough countries on board that offer quite attractive manufacturing location and incentives. We have to link our engineering skills with manufacturing industry. For this, startups are very integral part of our engineering. The government has recently launched startups action plan which is promising because it addresses not just risks for a startup entrepreneur, but also the ease of starting a venture, access to capital and funding, incentives for investors who wants to invest in these startups. It is because our old tax system is not very supportive of capital gains. With this policy, we are confident that in next two to three years large number of startups will emerge.
How can we push the startup culture in the electronic manufacturing hub?
By taking startup ecosystem to the universities is one step. We want at least five percent of the graduates to start their own venture even before completing their graduation, because their education system allows them to innovate in third year of engineering.
IESA is focusing to bring startup ecosystem to universities. There are many institutes and companies but the amount of collaboration between the industries and academia is limited. Startup ecosystem provides perfect mechanism to bind the two.
Second step is by nurturing engineers to become entrepreneurs, since make in India is just not about manufacturing in India but engineering, innovating and manufacturing in India. The first two have to mature then only they can merge with manufacturing.
What concerns ail startups?
As the government announced the list of smart cities to be developed it should just not be CISCO or IIM or Accenture to get all the projects. The local companies too have to thrive in it. They need to push their technologies in the development of smart cities. But funding for startup in technology in this country is not high. It is good that the government is stepping in. I am confident that there will be a strong emphasis on manufacturing of electronics. Startup will focus on electronic system and not just on software because that industry is well funded already. May be this is a good start now and when the government shows commitment by funding agencies, even private companies will participate in funds. So a good start has been made and in next one year we will see large number of startups in electronic industry getting funded.
What steps IESA has taken to nurture engineers?
We made a start with electro-preneur park in Delhi university’s south campus. Funded by the department of electronics and information technology with Rs 21 crore and promoted by software technology parks of India (STPI), IESA has set up an incubation centre where every year we will incubate at least 10 startup. These companies need to be at their early stage in a way they should only have a concept at that point of time and are looking for a prototype. After prototype there is a good funding mechanism because here at this level where venture capitalism gets in. However from concept to prototype funding is not available to many startups and this where electro-prenuer park plays a role. Typically, a startup is provided incubation facility for one year in which they develop a concept to a prototype. Variety of infrastructural support like space, IT, testing measurement equipment, prototyping facilities will be provided through this park. In this way they can only focus on innovation and not worry about organising things around them. Mentoring support will also be provided to them who have ideas but do not know how to mature them; to them who may face hurdles in technology, financial or business model. So idea is to have at least 10 startups every year for five-year of establishment of the electro-prenuer park, who will spend their one year in incubation, during which they have to mature the concept according to market needs to receive funding. In case they fail to attract investors, the cost of failure will be low.
First batch will begin in next two or three months. The project management has shortlisted eight startups across India out of 300 plus applicants for this time.
What it takes to keep going with these initiatives?
These initiatives need to have 10-15 years of continuous focus irrespective of which party comes to power. Central agenda has to be carried forward. This is perhaps a cause for worry of the international agencies. How the country ensures the international community that irrespective of what party makes the government, central agenda for Make in India will remain be progressive, and that there will be no regressive policies by next party coming to power halting the programmme?
taru@governancenow.com
