8 - The Electronics Industry in Tamil Nadu, India: A Regional Development Analysis

Summary

Once known for its over-regulated and autarkic economy, in recent times India has emerged as a leading exporter of software and IT-enabled services. Following sweeping domestic economic reforms in 1991 and the advent of international outsourcing, India was able to capitalize on its ranks of cost-effective, skilled labour to emerge as a global player in these emerging service industries.

In contrast, India's role as electronics producer is less well-known. Despite its array of state-owned electronics-producers and tradition of electronics production dating back to the 1960s, it has generated only a fraction of the jobs or export earnings of its better-known sibling.

However, this soon may change. The country's growing affluence, urbanization, and IT-literacy, coupled with evolving consumption patterns, mean that India has emerged as a target market of choice for not just consumer electronics, but also other sub-sectors such as office equipment and telecommunications products.

The combination of India's domestic market and its reputation as an attractive site for skill-intensive tasks has seen a large number of electronics-producing market leaders establish a presence in the country. In addition to production facilities, this has also entailed research and design centres geared to understanding the growing and increasingly attractive Indian market. This rapidly expanding market has also offered opportunities for local producer firms to emerge in product spaces such as the manufacture of mobile phones.

The consolidation of local and international market leaders operating in India has, in turn, enabled the country to emerge as a significant electronics exporter, particularly in areas such as: audio/video products; testing and measuring equipment; medical devices; and telecommunication products.

Just as the software sector has changed India's economic landscape, the hardware sector now promises to do the same. New centres of production are emerging, as lead firms and suppliers coalesce in specific areas. While traditional centres of electronics production such as Uttar Pradesh and Karnataka remain relevant for domestic production, Tamil Nadu is emerging as the pre-eminent centre of electronics manufacturing for export.

Over the past two decades, this state of 62 million people in the south of the country has undergone a far-reaching structural transformation. The agricultural sector is making way for the services sector, and Tamil Nadu's industrial sector is being renewed.