Recently India has been focussing on the “Make in India” initiative. This has resulted in the launch of PLI (Production Link Initiative) schemes. A lot of money has been committed resulting in investments by many companies. The purpose of this note is to evaluate the impact of these schemes in containing the overall trade deficit in Electronics — which is a key indicator of the success of these schemes. In the process, we will drill down our analysis to the item level and see where the scheme has a positive impact and where improvements are needed.
Indian Trade Deficit (Monthly Trend)
The following provides a bird’s eye view of India’s trade deficit trends for the past 12 months broken down at the level of the top 10 countries. One can see the overall trade deficit (at the monthly level) is on a rising trend. Last month it recorded almost an all-time high of $ 21 billion USD. China’s share is on the top with 30.7% on Nov 21.
Indian Trade Deficit (Yearly Trend)
The following provides a bird’s eye view of India’s trade deficit trends for the past 12 Years broken down at the level of the top 10 countries. One can see the overall trade deficit (at the yearly level) is on a rising trend. Last calendar year it recorded almost an all-time high of $ 157 billion USD (data till Nov 21). China’s share is on the top with 36.4% on Nov 21.
Indian Electronic Trade Deficit (Monthly Trend)
The following provides a bird’s eye view of India’s electronic trade deficit trends for the past 12 months broken down at the level of the top 10 countries. One can see the overall trade deficit till Oct 21(at the monthly level) is on a rising trend. Last month it recorded a value of high of $ 3.9 billion USD. China’s share increasing consistently is on the top with 65.07% on Nov 21.
Indian Electronic Trade Deficit (Yearly Trend)
The following provides a bird’s eye view of India’s electronic trade deficit trends for the past 12 years broken down at the level of the top 10 countries. One can see the overall trade deficit (at the yearly level) is on a rising trend. Last year it recorded a value of high of $ 44.3 billion USD (data till Nov 21). Though it appears that China’s share has decreased since 2018, however, if we aggregate HGK’s share with it the trend is seen rising — a value of 78.44% in the last year (China & HGK combined).
Electronic’s Share in Total Trade (Monthly Trend)
From the chart below one can see that India’s imports in electronics on monthly trends have remained steady between 10 to 12% with value in the month of Nov 21 @ 10.07% (lowest in last 12 months). Exports have risen since June 21 and are at the level of Dec 20 in % terms.
Electronic’s Share in Total Trade (Yearly Trend)
From the chart below one can see that India’s imports in electronics on a yearly trend have seen a steady rise till 2020. Only in 2021, it has been a drop and is now seen at $ 56.7 Billion USD till Nov 21. On the other hand, export has seen a steady fall (in % terms) and started rising from 2018 and now has plateaued in the year 2021.
Electronic Deficit in Total Deficit (Monthly Trend)
India’s electronic trade deficit of total deficit has fallen in the last few months from a high of 46.45% on May 21. This number is still very high and still remains roughly 1/5th of the total trade deficit.
Electronic Deficit in Total Deficit (Yearly Trend)
On a yearly trend, India’s electronic deficit is seen rising and is now (CY 21) at an all-time high of 28.18% ($ 44.3 Billion — data till Nov 21)
Electronic Exports Item Breakup (Monthly Trend)
The top 15 items constitute 71.3% of total exports, and of that mobile phones constitute 50% of the overall exports in the month of Nov 21. The exports of Smartphones have seen a rising trend. However, all other items are still a small proportion of the overall exports.
Electronic Exports Item Breakup (Yearly Trend)
Top 15 items 62% of total exports, and of that mobile phones constitute 33% of the overall exports in the year of C 21. The exports of Smartphones have seen a rising trend. However, all other items are still a small proportion of the overall exports.
Electronic Imports Item Breakup (Monthly Trend)
The top 15 items constitute 56% of the total imports, and of that PCs constitute 11% of the overall imports in the month of Nov 21. The imports of PCs and Parts of Telephones have seen a rising trend till Oct 21. India is also importing a high-value integrated digital ICS, which is at par with PCs and Parts of Telephones.
Electronic Imports Item Breakup (Yearly Trend)
The top 15 items constitute 60% of the total imports, and of that, ICs constitute 12% of the overall imports in the year 2021. The imports of PCs and Parts of Telephones have seen a rising trend till 2019, with a drop in 2020 and again seeing a rise in the year 2021.
Export of Mobiles Country-Wise (Monthly Trend)
Most of India’s mobile phones are exported to the UAE, which is 22% of the total of $ 693 million on Nov 21. Others form a small proportion of the overall exports.
Import of PCs Country-Wise (Monthly Trend)
Most of India’s imports of PCs and Laptops are from China, which is 68% of the total of $ 590 million on Nov 21. Others form a small proportion of the overall imports. This trend is the same for all other items as well.
Conclusion
After analyzing the situation it is clear that the benefits of PLI (Production Linked Incentives) are yet to be realized to their full potential. What we have gained from the rise in exports of finished mobile phones, a significant value has been lost due to the increase in import of components to manufacture them. Also, the sector where there has been a little impact of PLI policy is IT & Hardware. Imports are continuing unabated. Looks like more work needs to be done in order to contain the flow of precious foreign exchange on account of increased imports of Electronic goods & components.
(Views expressed are of my own and do not reflect that of my employer)
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