The latest updates on the Indian economy are very encouraging. The S&P Global upgraded India from ‘stable’ to ‘positive’ status. This reflects the confidence of the entire world in Indian initiatives of reforms. Many growth trajectories predict the Indian economy to grow at a stable rate of 6.8% consistently. Budgeted capex expenditure has increased to INR 11.5 trillion currently. This has about five times in its comparison in 2014–15. Private consumption growth, due to the expanding middle class (3.5% year-over-year) and private investments (10.6% year-over-year) are all-time high. With these credentials, India is plunging to become the third-largest economy in the world from its status of being the fifth. Public policy reforms, technological innovations and entrepreneurship are the drivers in this regard. Therefore, the question is not ‘whether’ but ‘when’ India would realize its goal of becoming the 3rd largest economy in the world.
Without honing the semiconductor industry Indian goal might take much longer than estimated. This would naturally be the second step, when the Indian IT and IT-enabled service sector has registered a 7% growth rate, which is more than our economic growth rate, to adopt. This must be seen as remarkable considering the impact of the pandemic and amid global supply chain disruptions. India’s position vis-à-vis semiconductor space reminds Charl Dickens’ statement “it was the best of times, it was the worst of times…”. It is the best of times — as internally we are growing unparalleled. Indian Government has taken the right step by hosting the Indian Semiconductor Mission (ISM); and would like to do everything to make India a hub of semiconductor industry. The ever-growing Indian demand for cell phones, electronic consumer goods, EV cars, IoT devices, solar panels etc., if supported with Indian-grown semiconductors, nothing like that. Global leadership also wants to support India as an alternate supplier/producer of semiconductors to balance geopolitical dynamics. There can’t be a better time for us to strategize for developing the semiconductor industry than now.
It is the worst of times, as perhaps the growth story needs to be analyzed microscopically as pertains to the semiconductor industry. It being a highly intellectual property (IP) intensive industry (and has a credit of generating nearly 41% of US GDP) the growth parameters are going to be determined by the Indian strategy to effectively enforce IP as well as enforcement of commercial contracts. Indian efforts were recently heralded when it jumped 71 positions to attain 63rd rank in the ‘ease of doing business index’ by the World Bank. To draw a comparison, we held 134th position in 2014. This only showcased our resolve to move strategically to further improve the position to fuel our aspirations of being the third-largest economy in the world. However, inter alia, our parameters concerning enforcing contracts did not fare at all. We were globally ranked 186th in 2014 and we stood at 163rd rank in 2020. Even this marginal improvement was due to the efforts of the legislature by decriminalizing 3,400 minor technical or procedural defaults; taking out 39,000 compliances from lawbooks; providing tax rebates to startups and innovative enterprises; bringing out bankruptcy reforms etc.
When it comes to enforcement of the laws we still found wanting. Particularly concerning enforcement of contracts and IP enforcement, which are highly sensitive areas from the semiconductor space, much needs immediate attention. USTR, which works to protect American innovation and creativity across the global market, in its Special Report-301 placed India on the watchlist per its IP enforcement standards. This should be taken very seriously to make some systemic improvements. This would only help us in realizing our semiconductor prosperity as well as global confidence. It is not just the US observations, even from our protection point of view as well we need to gear up our policies and strategies.
The Indian government has committed to invest INR 2,30,000 Cr. towards developing the semiconductor industry. Big players like Tata, Vedanta, LnT, AMD, Micron etc., have already made significant investments in their semiconductor initiatives. The growing focus of India in this space has led to a burgeoning number of semiconductor startups in the country, who are working relentlessly to realize the Indian dream of semiconductor prosperity, with their agility and innovative zeal. There are more than 300 startups in India in this space. However, only 94 of them have managed to get some funding. Only 38 among them have attracted Series A funding. This low turnout is predominantly due to a lack of IP enforcement infrastructure. Even the public money invested into the space can only be protected and grown if there is a reinforced IP and contract enforcement. Startups can’t afford to have their manufacturing fabs, even if they succeed, as it might need astronomical investments.
Therefore, they would be hoping to be rewarded by realizing their IP rights, which again draws our focus back to the IP enforcement mechanism. Our big players indicated above would need a strong IP/contract enforcement framework, without which Indian semicon prosperity would remain a distant dream.
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