The budget is the place where one expects the government to put its money where its mouth is. Barely a month before the presentation of the budget, Union Minister for Human Resource Development, and Communications and IT Kapil Sibal said the government had prepared “a multi-pronged approach” for the electronics hardware sector.
Among the prongs of the strategic vision that Mr. Sibal and his top-level colleagues (including his deputy, Sachin Pilot) spelt out during a daylong stop in Bangalore, was the promise to establish an Electronic Product Development Fund with an eventual corpus of Rs. 10,000 crore. Mr. Sibal said the fund, operating through a special purpose vehicle, would support research and development activity, invest in the development of intellectual property and enable transfer of technologies.
The Minister of State in the Ministry, Mr. Pilot, said the ultimate dream of the industry, the establishment of a semiconductor fabrication unit, with a capital investment of $2.2 billion, would be closer to realisation within the current year.
Outlining the contours of the National Policy for Electronics currently on the government's drawing board, Mr. Sibal said a National Electronics Mission would be constituted, which would develop strategies for the industry. Also on the anvil is a National Electronics Board to oversee the implementation of the new policy.
Nothing in the budget suggests that any of these measures are likely to be implemented within the next financial year. The allocations for the Ministry, under the head ‘Telecommunications and Electronics Industries for 2012-13', is Rs. 3,051 crore. It is actually lower in real terms, when compared to 2011-12, when an allocation of Rs. 3,049 crore was made.
In fact, the Ministry spent 33 per cent less than what it budgeted for under this during the current year. Indeed, allocations for 2012-13 are actually lower than the actual expenditure made by the government in 2010-11 under this head.
The allocation for the promotion of electronics and IT hardware manufacturing has been increased from a paltry Rs. 2.83 crore in 2011-12 to Rs. 5 crore in 2012-13, while the IT for the Masses programme, which aims to create IT infrastructure for women and the Scheduled Castes and Tribes in order to promote “inclusive growth”, has been kept static at Rs. 14.93 crore.
P.V.G. Menon, president, India Semiconductor Association, said the Electronic System Design and Manufacturing (ESDM) sector would have liked to see “concrete allocations” for the Electronic Product Development Fund and the Special Investment Package Scheme (SIPS), which are a part of the National Electronics Policy that is on the anvil.
The policy that is still in the making has been widely expected to reverse the notion that a “hands-off” policy is best for industry, and that the industry will thrive only if the government steps back and does nothing. Instead, it marks a realisation that government support — as in China, South Korea and Taiwan — is critical for the industry to pick up economies of scale and scope.
The inability of the government to actually fund its promises is likely to be seen as a serious loss of its credibility.