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Sunday, February 26, 2006

Indian Hardware Imports Likely To Exceed Software /Service Exports

Strange are the ways that laws of trade impose discipline and instill neccessity on people, society & nations. Assocham, an apex indian trade body believes that IT and ITeS, one of the largest sectors in the Indian economy could become potentially become the biggest drain on India’s foreign exchange reserves.Already a net importer and with huge energy needs emerging, this could be bad news for India. According to Assocham estimates, IT industry will require computer hardware worth $77bn by ’10 against the industry estimated exports of around $60bn. A major part of which is expected to be met through imports if hardware manufacturing doesn’t pick-up in India. Assocham say that the growth of the Indian economy in the next ten years (’05-15) is estimated to increase electronics demand to $159bn in ’15 from the current level of $11.2bn. But given only a tiny portion of this demand would be met from local production. Its to be noted that Indian electronics production stands at 1.7% of India’s GDP in contrast to that of. South Korea’s 15.1%,Taiwan’s, 15.5% and China’s 9.6%. I do expect that India would begin to focus in hardware & hardware related production very aggressively from now on. Recently C.K.Prahalad pooh poohed the view that India may not be a force in manufacturing - he does not rule out India emerging as a major manufacturing centre. People assume it is all going to be just software, and knowledge-based, but India will invent a different kind of manufacturing - very high quality, design-centred and software embedded. Hopefully , the next generation chip design shall see significant contribution coming in from facilities set up in various indian locations.It is more you design, you develop, you manufacture, you ship. This is still in its infancy, but I expect it to grow as rapidly as the software side. This, I believe is a cosmic intervention - given the entrepreneurism & dynamism that we now currently see in India - we shall see huge investments and efforts getting channelised towards building/scaling up the industry within the country.

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