Tuesday, October 25, 2011

India On-shoring?

The Indian government's Department of Telecommunications quietly released a policy document that should rattle pretty much every global tech company in the world. The National Telecom Policy advocates a huge increase in domestic manufacturing and design, particularly in the areas of microchips, network equipment and computing devices (including smartphones). Designed to meet local demand for relevant products and services, reduce the trade deficit and ensure cyber security, the policy aims to:

  • Promote domestic production of telecoms equipment to meet 80% of India's demand and capture more of the global ICT market
  • Provide preferential market access for domestically manufactured telecommunication products including mobile devices and SIM cards
  • Support development of Indian standards for hardware and software
  • Streamline taxes and provide greater access to financial resources for local manufacturers and R&D groups 
For India, this is a well-designed and ambitious policy initiative, and multinational ICT companies can't afford to ignore the underlying reasons for the move. Countries like India and China, which have the design talent (and in some cases the manufacturing capacity) to implement or impose a home-grown ICT ecosystem, are becoming increasingly aware of the inherent vulnerability of buying critical technologies from abroad. Multinational ICT companies may see in the new policy a threat to market access, but it remains to be seen whether the DOT has the broader government backing to implement and enforce it. There are also unresolved questions about the policy, such as whether locally designed products made by multinational companies will qualify as domestic.

Tech companies should also smell opportunities in the new policy. The goals of ensuring at least one e-literate person per household and increasing access to mServices promise a growing market for mobile and low-cost devices. Efforts to support IT purchasing by small- and medium-sized businesses, especially in Tier II and Tier III cities, may also bolster demand. And there will almost certainly be partnership opportunities, particularly for companies that respond to the government's concerns over cyber security by building in or enhancing security features in their chips, network equipment, hardware and software.

For more information about the Indian Government's proposed policy and its implications for your business, contact anne.craib[at]vitalwaveconsulting.com