‍

Untapped Potential: India's next technology goldmine

‍

‍

India ‘s technology industry has expanded at an unparalleled rate. COVID-19, a Black Swan event, has slowed the speed of the global economy and is gradually reshaping the norms for doing business. Over the past 9 months, big power vacuums have been produced in various industries. Throughout this time, Indian start-ups and potential entrepreneurs have been left with a critical decision, either to change the strategy to meet the needs of the new normal, or to stay the course.

Years of experience flowing through the waters of the Hardware Technology Industry has allowed me to write about the obvious facts and figures that have somehow made an horrific epidemic a light at the end of the tunnel and left us with never before seen opportunities to succeed in a global environment. Let’s get off to a quick start.

‍

‍

Two main components of the technology industry in India include IT services and Business Process Outsourcing. In 2017, the sector accounted for 7.7% of India’s GDP. This will give you an appreciation of the value of it. In fact, the IT industry has 4.36 million employees, so it’s not shocking that India is the world’s biggest IT exporter. This leads to a growing number of start-ups focused on IT. In view of the growth and business dimensions of IT in India, these prospects can be called safe bets. Although the story is somewhat different on the other side of the technology coin.

The biggest weakness in the ecosystem is we don’t have end-to-end product manufacturing and supply chain system. — Rajat Jain, Kimirica Hunter

India has been the innovation bed for software-based startups, while the hardware segment of the Indian startup ecosystem has been lagging behind. Until a few years ago, the hardware industry was all about giant factories producing vast quantities of products. Hardware was easily commoditized and manufacturers with the lowest cost and large-scale operations won. There are several reasons for this:

· Budget — Creating innovative hardware solutions can incur high infrastructure costs unbelievably early in the development cycle.

· Education — Unlike the IT sector, India lacks proper education and interest in hardware and electronics engineering due to a lack of readily available jobs and opportunities in the industry.

· Delayed Gratification — Indian investment philosophy prefers on-going growth, stable revenues, and fast turnaround times from an early stage. Hardware based products require years of research, high startup capital and patience before scalability is seen.

· High Import Costs — High import costs and broken customs practices weigh heavily on the R&D and product development scenario in India. These costs make domestically produced goods more expensive than imported goods with zero tariffs.

‍

‍

‍

Looking away from these problems gives a glimpse of the untapped potential of this industry. One can even say that the potential for growth in this industry in the long term can far outweigh the associated risk. You may note that demand for electronic devices increased from USD 80 billion in 2012 to USD 400 billion. 60–70 per cent of this demand has been met through imports. In the same period, the growth of the IT industry increased by almost 24.4 per cent.

After gold, electronics is the biggest import in India. — Sandeep Tandon, Whiteboard Capital.

I am not suggesting that the hardware industry is a money-making opportunity that people have neglected. But with some consideration, it could become an oil well of the modern era. First, people should understand that modern hardware is all about combining hardware with smart software. These innovative products, powered by artificial intelligence, advanced analytics and cloud processing power, will enable Indian start-ups to play their part.

India has already developed a reputation for its expertise in the software technology space. We are beginning to see startups emerging in the hardware space that are solving important problems. — Ravi Narayan, T-Hub

While the Electronics Sector in India is currently establishing its global role, there are a number of advantages that India offers that can be effectively leveraged to achieve higher growth: manpower and market demand. With the growth of e-commerce, customers can purchase the product online, and logistics can be managed by an e-commerce company or a logistics company. This helps to give the startup a national reach without having a complex distribution chain or a large inventory.

To give you a further perspective on the opportunities that are ready for you, here are some policy changes made by the government in recent announcements.

‍

‍

Increased liberalisation of Foreign Direct Investment (FDI): which will allow 100% FDI through an automatic route, creating an opportunity for Indian entrepreneurs to attract capital from investors outside the country.

· Establishment of Electronic Hardware Technology Parks (EHTPs) and Special Economic Zones (SEZs): When SEZs were created for the IT industry, India became the largest exporter of the IT industry.

· Exempting import-dependent inputs/components for PC manufacturing from a Special Additional Duty (SAD): Will help innovators achieve perfection without spending most of their money on taxes and duties.

· Incentivising the export of certain electronics goods in the Focus Products scheme under the Foreign Trade Policy: Providing an opportunity to compete globally with products and technology developed in India.

· Funding 3000 PhD students in electronics and IT across the Indian universities: Starting a revolution in the education field, where computer science is still the only degree that guarantees employment.

· To offer incentives of up to $1.7 billion by 2020 to electronics hardware manufacturing entities setting up shops in India: This will help to compensate for the drawbacks of establishing a new industry in the region.

‍

Entrepreneurship is the willingness to follow your curiosity. — Vani Kola, Kalaari Capital

‍

All these facts and figures show that it might be the right time to start the journey of Hardware Excellence. We are directed at all those entrepreneurs who are waiting for the right moment to try their ideas, and at those who may have tried and failed. Maybe it’s too early to go out and do something right now, maybe it’s too late, but we’ll never know until we try.

‍