India's electronics exports to the US have transitioned from a trade deficit of $0.6 billion in FY17 to a trade surplus of $8.7 billion in FY24, underscoring a significant increase in value addition by the country in the global electronics supply chain, the Economic Survey 2023-24 said on July 22.
Within the electronics sector, the category that has experienced the most growth is mobile phones, with exports to the US rising from $2.2 billion in FY23 to $5.7 billion in FY24.
"As India looks to deepen its involvement in Global Value Chains (GVCs), it will look to the successes and strategies of East Asian economies. These economies have typically pursued two main strategies: reducing trade costs and facilitating foreign investment. Given that GVCs are designed to minimise costs, countries like Malaysia, Vietnam, and Taiwan have focused on lowering their trade costs over time. For India, improving logistical efficiency has been a key focus," said the survey.
"The second strategy, focused on investment facilitation, includes actions to increase and stabilise foreign investment. The PLI scheme, for example, encourages high-quality foreign investment by offering a market-linked incentive system for companies to comply with."
According to the Economic Survey, India faces two choices to benefit from China plus one strategy: it can integrate into China's supply chain or promote FDI (foreign direct investments) from China.
"Among these choices, focusing on FDI from China seems more promising for boosting India's exports to the US, similar to how East Asian economies did in the past. Moreover, choosing FDI as a strategy to benefit from the China plus one approach appears more advantageous than relying on trade," it said.
"This is because China is India's top import partner, and India's trade deficit with China has been growing. As the US and Europe shift their immediate sourcing away from China, it is more effective to have Chinese companies invest in India and then export the products to these markets rather than importing from China, adding minimal value, and then re-exporting them," it added.
India has a goal of achieving $300 billion in revenues from electronics production by 2025-26, up from around $103 billion now.
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