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National IT Policy-2011

Government of India, Ministry of Communications and Information Technology (MCIT) has released the national Policy on Electronics 2011 (NPE 2011) outlining the policies of the Government for the IT sector. The policy has implications on all present and future businesses in IT software and hardware.

The report records that the global size of the electronic industry is presently US$ 1.75 trillion and set to grow to 2.4 trillion by 2020. (1 trillion US$=approx 50,00,000, crores). The Indian demand is expected to be US $ 400 billion by 2020. (1 billion US$=approx Rs 5000 crores).

The domestic production in 2008-2009 was about Rs 100,000 crores. The policy recognizes that 90-95% of this huge Indian production market is presently benefitting foreign players and the value addition in India is only 5 to 10%. It is estimated that by 2020 only 25% of the domestic demand is met by indigenous production and the balance need to be imported.

Thus there is a huge opportunity loss for the Indian economy unless the trend of foreign dependency is not reversed.

It is also necessary for us to remember that there is a huge security risk for the country in this foreign dependence since most of the hard ware supplies is from China which is known to be implementing a policy of Cyber intrusion through manufactured products.

The report recognizes the critical need to develop indigenous ESDM (Electronic Systems Design and Manufacturing) industry in India through a policy initiative and this policy tries to address this issue.

The vision statement is therefore rightly focussed creating a globally competitive ESDM industry to meet the Indian needs and also serve the international market.

.. A truly laudable vision ..long overdue.


In pursuance of the above vision it is inteded to  promote and develop  indigenous manufacturing in the entire value-chain of ESDM within the country.

It is also intended to promote a vibrant and sustainable ecosystem of R&D, design and engineering and innovation in Electronics.

Specific Objectives  of the Policy:

One of the objectives set out is to achieve global leadership in VLSI. This would require attention on the Engineering Education system too. Special focus on augmenting the Post Graduate education in the area is also envisaged. Educational institutions may take note of this policy initiative.

The policy indicates a need to create long term partnerships between ESDM industry and strategic sectors like Defense, Space and Atomic Energy etc. This is an area of concern due to the security implications.

Government of India has already allowed Chinese intrusions into strategic areas such as Internet backbone and also involved Chinese companies in security initiatives with IISc. Now the policy of "long term partnership" could open doors for Chinese companies to intrude directly into critical national infrastructure.

This area is a matter of concern and needs to be watched closely.

Rest of the policy objectives are aimed at more production at affordable costs and are welcome. A policy on e-waste management is also included since it is part of the development requirement.

Strategies for Discussion

The first strategy initiative suggested is the fiscal incentives for the development of the ESDM sector. Given the political issues involved in resolving economic policy conflicts we need to wait how these incentives are packaged in terms of removing the difficulties of providing land, electricity, water and such other facilities in an uninterrupted manner and on very large scale and economic cost as may be demanded by the industry.

Power will continue to be a bottleneck and with the politically motivated opposition to various power projects this would perhaps be a major bottleneck. We may therefore need a separate sub policy for "Power for ESDM sector".

The second most important strategy suggested is to provide preferential market access for domestically manufactured electronic products including mobile devices, In many of the recent Government initiatives, both Central and State Governments have decided to purchase Apple i Phones, i Pads etc in large numbers. It is necessary to immediately put an end to such purchases and divert the purchases to indigenous products.

The Government is in the process of getting the ESD Bill passed which will make  E Governance Service delivery mandatory in the next 5 years. This is expected to provide a push to the use of IT in e-Governance projects and therefore push up the demand for ESDM products. However the new industry which the current policy may promote will not be ready to meet the demand of the e_governance sector in the next few years and hence the fruits of ESD Bill if any will only be reaped by foreign suppliers of mobile and computer devices. By the time indigenous manufactures enter the field the dependency on the international suppliers will be so much that it would not be possible for the Government to shift to the indigenous manufacturers.

The policy fails to recognize the need for development of an indigenous OS for Computers to reduce the dependence on Windows systems. Similarly in the mobile segment it is necessary to avoid dependency being built up on proprietary systems. The policy is silent on this factor.

It is necessary that the current policy support should be more towards open source products and later indigenously produced products can be accommodated. In order to ensure that progress is not hindered by such a policy it is necessary to encourage international agencies to set up local assembly and marketing agencies so that the value addition on Indian soil is increased from the abysmal levels as seen at present.

The third important strategy suggested is the requirement of a "Stable Tax Regime" and it is suggested that a stable tax regime of 10 years is planned. Considering the long gestation periods involved the stable tax regime period may be better increased to at least 15 years.

Overall the policy initiatives are well meaning and the proof of the pudding is in the eating. We need to see how the policy will be implemented. If the policy implementation is not properly monitored, it can very well be misused in a manner which will put the 2G scam to shame.

In order to make this policy corruption proof, a separate authority for implementation can be considered under GOI which should be accountable to a high power committee consisting of  Parliamentarians of all parties as well as eminent members of the public and Judiciary. Such a committee should have the powers to investigate and prosecute if necessary and directly accountable toa multi member bench of the Supreme Court.

... Well there is no bar on dreaming..I suppose..

Copy of Policy



October 08, 2011



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