The Indian economy saw a period of slowdown in fiscal year 2012. The country recorded a GDP growth of 5.3% in the fourth quarter which was its worst performance in the last nine years. India's electronics industry also suffered a minor slowdown but managed to record a y/y growth of 10%. The production turnover of the industry grew at a CAGR of more than 15% in the last six years and is expected to cross INR 1.5 tn by the end of fiscal year 2013.

The country ranked low in terms of electronic equipment manufacturing, accounting for only around 1.5% of total world production. According to the Department of Electronics and Information Technology (DeitY), more than 50% of demand for the country's electronics was met through imports and the figure is expected to rise to 75% by 2020. The government is undertaking several initiatives to promote domestic manufacturing of electronic equipment. Under the Draft National Policy on Electronics (NPE), the government has targeted to create an eco-system for a globally competitive electronic system design and manufacturing sector in the country, in order to achieve a production turnover of about USD 400 Bn by 2020. The policy also targets investment of about USD 100 Bn and employment to around 28 mn people at various levels of the industry.

All six major sub-sectors of the Indian electronics industry saw growth in production turnover during the fiscal year 2012. Highest growth was recorded by the electronic components and communication equipment sub-sector, while consumer electronics was slightly subdued compared to the past few years. However, rising costs of raw materials and persistent inflation was negatively affecting the profitability of the sector. Major domestic players in the industry recorded a significant decline in their profit margins during the year.

The outlook for Indian electronics is positive owing to the huge domestic demand and supply gap and double digit production growth rate in almost all of its sub-sectors. The increasing population and growing per capita income will increase the size of this industry in the years to come.

Key Points:

• In FY12, India's electronic industry recorded a production turnover of around USD 30bn. The country's total electronic hardware production turnover grew at a CAGR of 16.8% during the last six years.

• The largest contribution in FY12 came from communication and broadcast equipment, which accounted for 28.3% of the total production turnover, followed by consumer electronics with 23.9%. Together, these accounted for more than half of the entire production turnover of the industry.

• Electronic hardware exports grew at a CAGR of 28.9% during 2007-2012 and exceeded USD 9bn by the end of FY12.

• During January 2000 to June 2012, the electronics sector received foreign direct investment (FDI) of USD 1.17bn or 0.7% of the country's total FDI inflows. This was low when compared to other industrial sectors. However, it grew by 19% year on year over the June 2011 figure, indicating higher growth of inflows to the sector.