India strives to emerge as global computer hardware hub

Tuesday, 07 October 2003, 19:30 IST
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NEW DELHI: As India's dollar-spinning software sector continues to hog the international spotlight, the nimble-footed domestic IT hardware industry is striving to emerge slowly but steadily as a global manufacturing hub. Industry observers say the Indian electronics hardware industry has the potential to grow 12 times and develop into a $70 billion market by 2010, provided the government and companies take important actions to develop the sector. "The hardware industry in India is coming of age," says Vinnie Mehta, executive director of Manufacturers Association of Information Technology (MAIT), the premier umbrella group for hardware companies in India. "If the number of personal computers sold last year is any indication of the size of the market, the industry clocked 2.3 million units in the year ended March 31, 2003, registering a growth of 37 percent," Mehta told IANS. "And we expect the growth to be undiminished and we would be growing, if not 37 percent, then at least by 30 percent in the next couple of years." According to Mehta, the profile of the local hardware companies have undergone major changes in recent years with most of the players in the sector now focusing on research and development of new products and in areas of chip designing. "I think in next few years India will make its mark in the hardware sector as well and if not a manufacturing factory to the world like China it would definitely be a garage," he said. The official blamed the government's policies for the tepid growth in the hardware industry in India despite the country having a vast pool of technically qualified and cheaper manpower base. "I think, on one hand, like any other industrial sector that are capital intensive, the hardware industry in India faces bottlenecks like non-availability of quality power and roads," said Mehta. "We have also been facing anomalies in the duty structure. It's an inverted tariff structure. The duty on input and basic raw materials, especially for dual usage items like metal parts and chemicals, is higher than finished goods," he added. Mehta said local levies, especially excise duties imposed by state governments, are also very high as a result of which the grey market had been able to do brisk business in the local market. "They (grey market players) evade the local levies like excise, the sales tax or municipal taxes like octoroi and the state taxes," he said. "Whereas the incidence of local levies for genuine firms varies anywhere between 20 percent and 30 percent, which is very significant when the industry operates on a margin of two to four percent. It doesn't augur well for the entire sector. "Therefore, we need major reforms on the local levies front. We need the value added tax to be introduced in true spirit in all the states so that we will be able to cope with the grey market." MAIT has recommended the lowering of all local levies, especially the excise duty, from existing 16 percent to eight percent to bring down the prices of IT products and make technology available at the grass root level. "Should that happen, the domestic market could grow comfortably by 50 percent per annum for the next few years. Lower domestic taxes will also enable the organised sector to offer prices comparable to the unorganised sector," said Mehta. The official said the government must also contribute in "catalysing the consumption and the growth" of the industry. "While in India most state governments have said that they will spend two to three percent of the budgetary allocations on IT, it still hasn't be translated into reality," he said. "Of course, whole lot of e-governance projects are on drawing boards in a large number of states. A few pilot e-governance projects have been very, very successful but then you need more of these kinds of initiatives."
Source: IANS