What Ails India’s Electronic Manufacturing Industry: An Assessment

Abstract

Manufacturing imperatives of the electronics industry require technological capability across components to develop a strong supply base. With domestic value addition being less than 25%, catapulting domestic production capability would necessitate promoting productivity enhancing innovations at the firm level, particularly in design and development capabilities. For assessing the technological orientation of the electronics manufacturing Industry, the empirical investigation of this article focuses on two important channels of influence, namely imports and firm productivity and exports and firm productivity under a liberalised regime, thereby identifying the determinants of production growth of electronics manufacturing in India. The econometric analysis has underlined the low technological capability of manufacturing firms. While the import of raw material is significant for both domestic-oriented and export-oriented firms, import of capital goods is significant for only export-oriented firms. Further, R&D expenditure is low which is statistically significant. Taken together, these results highlight that high imports are on account of domestic non-availability, and imports have substituted domestic R&D that underlines low technological capability of Indian firms. Further, export-oriented firms have technologically advanced products possibly to face the competitive pressures in the international market. To supplement these insights, the descriptive analysis focused on the trade orientation of the sample firms and cost structure in determining their market behaviour. The share of firms engaging in domestic activity surged post liberalisation, suggesting that the focus was primarily on fast expanding domestic market. As such, import engagement has increased significantly but export engagement has decreased. This suggests that imports have not facilitated export growth but only bridged the gap of non-availability of inputs domestically. The analysis of cost structure points to a decline in the share of capital goods and R&D, both implying lack of technological capability of the firms. Further, increasingly firms are turning to trading, that is, import of finished goods. As such, to promote a conducive manufacturing ecosystem, there is a need to promote technological capability and encourage export orientation of the firms. JEL Codes: F10, F14, L63

Value Chain and Technology-Based Complexity Analysis of China’s Manufacturing Exports

“…Existing studies still only examine the heterogeneity of importing intermediate goods in one dimension. is paper takes the equipment manufacturing industry as the research object and distinguishes them into imported intermediate manufacturing goods from developed economies, imported intermediate service goods from developed economies, imported intermediate manufacturing goods from developing economies, and imported intermediate service goods from developing economies according to their sources, focusing on e heterogeneity effect of imported intermediate goods is examined, so as to provide policy guidance for the selection of imported intermediate goods and even trading partners for China's equipment manufacturing industry [12].…”