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Consumer electronics sector seeks fiscal incentives for R&D

The consumer electronics market in India is anticipated to witness a robust growth of 6.06 per cent from 2024 to 2028, culminating in a substantial market volume of $92.4 billion in 2028, according to Statista. From smartphones and laptops to wearables and smart home devices, these gadgets have become an integral part of our lives. However, despite the market’s immense potential, India remains heavily reliant on imports for a large portion of its consumer electronics needs. This dependency not only stifles domestic innovation but also exposes the economy to external vulnerabilities.

The key to unlocking India’s true potential in consumer electronics lies in fostering a robust R&D ecosystem. Currently, India’s R&D spending in consumer electronics lags behind that of global leaders, posing a significant challenge to the government’s ambitious vision of reaching a $300 billion electronics manufacturing target by the year 2026. R&D fuels innovation, allowing domestic companies to develop cutting-edge products tailored to the specific needs of Indian consumers. It also creates high-skilled jobs, attracts foreign investment, and strengthens India’s position in the global value chain.

R&D ecosystem in India faces several challenges

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The current R&D ecosystem in India confronts several formidable challenges. There is limited access to capital, particularly in the context of consumer electronics R&D. This area demands substantial financial investments encompassing infrastructure, manpower and technology.

The high-risk nature and protracted gestation period of developing new technologies act as deterrents for private sector investment. The significant risks associated with innovation, coupled with the considerable time it takes for these ventures to yield returns, create an environment less conducive to private sector involvement.

Notably, India grapples with a shortage of a skilled workforce specialized in cutting-edge consumer electronics technologies, limiting the pool of engineers and scientists with the necessary expertise.

The R&D ecosystem also is marked by fragmentation due to the prevalence of numerous small and medium-sized enterprises (SMEs). This fragmentation impedes collaboration and knowledge sharing, hampering the collective progress of the sector. Addressing these challenges is crucial for enhancing the vibrancy and effectiveness of the R&D landscape in India’s consumer electronics industry.

Role of fiscal incentives

Targeted fiscal incentives can play a crucial role in addressing these challenges and catalyzing R&D in India’s consumer electronics sector. These incentives can act as a bridge, mitigating the risks and costs associated with R&D, and encouraging private players to invest in innovation.

Proposed Fiscal incentives for R&D growth in consumer electronics

Several potential fiscal incentives that could significantly boost research and development (R&D) in India’s consumer electronics sector are worthy of consideration for inclusion in the upcoming Union Budget 2024.

The provision of tax breaks for R&D investments emerges as a key strategy. By offering tax deductions or exemptions to companies engaging in R&D activities, the government can effectively make innovation more financially attractive, thereby encouraging increased investment in this crucial domain.

Also, the allocation of grants and subsidies specifically tailored for R&D projects would be instrumental in reducing the financial burden on companies, motivating them to undertake high-risk ventures that might otherwise be financially challenging.

Additionally, implementing accelerated depreciation allowances for R&D equipment would have a transformative effect, enabling companies to write off the costs of such equipment more swiftly and, consequently, freeing up resources for further investments in innovative pursuits.

Moreover, fostering public-private partnerships for R&D infrastructure development stands as a strategic move. By establishing collaborative ventures between the government and private sector entities, the creation of world-class R&D facilities becomes feasible, providing critical infrastructure necessary for the advancement of researchers and startups in the consumer electronics sector.

Proposals for Union Budget 2024

In shaping a comprehensive strategy for fostering R&D in India’s consumer electronics sector, a multi-pronged approach within the upcoming Union Budget 2024 is imperative.

The establishment of a dedicated R&D fund for consumer electronics emerges as a pivotal step. Allocating a specific budget for R&D grants and subsidies exclusively tailored for this sector would not only provide targeted financial support but also catalyze innovation by addressing the unique challenges faced by consumer electronics developers.

Additionally, introducing tax breaks for angel investors and venture capitalists constitutes a strategic move to spur early-stage R&D projects. By offering tax benefits to investors supporting high-risk ventures, the government can attract crucial funding to propel innovation in the consumer electronics landscape.

Furthermore, a critical aspect of this strategy involves simplifying intellectual property rights (IPR) regulations. Streamlining the filing and protection process for IPR would create a conducive environment, incentivizing innovation and fostering a culture of knowledge creation within the consumer electronics industry.

Lastly, the budget should emphasize the strengthening of industry-academia collaboration. Promoting partnerships between academic institutions and industry players is instrumental in bridging the gap between research and commercialization, ensuring that innovative ideas find practical application in the market. Collectively, these proposed measures can form the cornerstone of a transformative fiscal policy, driving innovation, and propelling the consumer electronics sector into a new era of growth.

Quantifying the impact

The Union Budget 2024 presents a golden opportunity to unleash the true potential of India’s consumer electronics sector. By prioritizing R&D through targeted fiscal incentives and policy reforms, the government can create an environment that fosters innovation, competitiveness, and self-reliance. Studies suggest that targeted fiscal incentives can lead to an increase in R&D spending. This, in turn, can fuel the development of new technologies, create high-skilled jobs, and boost India’s exports of consumer electronics

Thus, Investing in R&D is not merely an economic strategy; it is a strategic investment in India’s future. It holds the key to unlocking domestic manufacturing capabilities, weaning the country off import dependence, and establishing India as a global leader in consumer electronics. The Union Budget 2024, with its focus on fiscal incentives and R&D-friendly policies, can act as a catalyst for this transformation. By nurturing innovation, we can create not just gadgets and screens, but a brighter future for generations to come.

The author is Co-founder, UBON. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.

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