India’s unique capabilities in the IT and ITES sectors are well documented. There have been multiple surveys endorsing India’s dominance and pegging India’s market share at over 50% of the global outsourcing industry. Nearly 75% of Fortune 500 companies rely on Indian software expertise to make them competitive. The growing concentration of the software services industry in India and lack of further financial incentives from the government have prompted global companies to adopt a de-risking strategy and look at other viable locations for growing their business. The “India+1” model for software outsourcing is a reality – and Indian companies are seeking to adapt to the changing world order. More and more of them are adding global operations capability to offer this diversification themselves. Most countries wanting to position themselves as an India+1 destination offer strong incentives to invite Indian IT players and others to set up shop on their shores. The Greater China region, the number one destination for hardware electronics manufacturing today, is well ahead of any other country. It offers unmatched scale, skills and infrastructure. Interestingly, there also seems to be a similar sense of risk awareness among electronics manufacturers and their customers along the China-Taiwan belt – constituting nearly 56% of the global electronics manufacturing industry. There is definitely room for a second destination for risk diversification and keeping costs under check. Multiple survey reports from service providers in India and China demonstrate the large gap now between China and India in terms of business expense. Salaries in China are shown to be double those of India; property prices also have crept ahead. A ‘China+1’ strategy seems to be taking shape and India could well be the beneficiary if it gets its act together in the electronics manufacturing space. Apart from the opportunity the ‘China+1’ position offers, there is a bigger challenge of increasing domestic consumption which should force us to look at this space very aggressively. Today, the global electronics hardware industry ishardware suppliers reportedly $1.75 trillion and is projected to reach $2 trillion by 2014. Demand in the Indian market stands at $45 billion and is projected to grow to $125 billion by 2014.brass hardware manufacturers In India, there is a massive mismatch in demand and supply, with domestic production catering to less than 45% of domestic consumption. This gap will only get wider with increased consumption and is estimated to grow at a CAGR of 22% between 2009-20. At this rate and without scaling domestic manufacturing, the foreign exchange needs are estimated to be as big as what we spend on oil by 2020.brass hardware manufacturers Clearly, building India’s manufacturing capability is critical. In addition to reduction in technology costs that a full component ecosystem would generate, it would also contribute significantlyby creating high quality direct and indirect manufacturing and service jobs in the hi-tech field; giving India greater standing in the global IT manufacturing industry; stimulating increased technology and knowledge transfer to domestic firms; lowering the price of information infrastructure/PCs and other electronic equipment for Indian consumers; and making locally produced electronic hardware more competitive globally. To better understand the factors keeping the electronics supply chain from being established, a survey was conducted by a leading hardware vendor in which feedback of 35 suppliers was collected and analysed. It found that more than half had never considered India for investment. Of those that had, opportunities for sales within India and the possibility of realising operational cost savings were the primary drivers. Of those that had not invested in India, concerns over infrastructure, taxes, labour issues and lack of incentives were primary deterrents. High transaction costs – driven by cumbersome documentation and inordinate delays – owing to a complex process are another problem. While infrastructure remains a long-standing issue with enough written about the need to improve in that area, here are the top five enablers we need to work on immediately. These short-term measures can give a boost to us to get this industry started similar to software services in the late-1980s. One, the government should offer a long-term, stable tax structure and a comprehensive range of incentives to instil confidence among potential investors. Introducing GST and having a unified tax structure for states would lead to ease of conducting business. Two, labour laws should be made more flexible to help reduce overall cost of employment. It is important that India formulates a more liberal contract labour procedure and strives to establish a meaningful skills development programme in partnership with the industry. Moreover, industrial relations, a sensitive aspect in the manufacturing sector, should be made more conducive and cordial by a proactive set of policy measures. Three, create strong demand generation for technology by expanding e-governance initiatives and IT investments in healthcare and education. Four, reduce steps and extensive documentation requirements. Finally, industry and government should collaboratively launch a communications campaign targeting electronics manufacturers and help resolve misconceptions about doing business in India. It is heartening to see the government move to address these issues. Apart from creating a multitiered special incentive package scheme for electronics manufacturers, the government is also considering the setting up of a special purpose vehicle under a National Electronics Mission, which would act as a nodal agency for the electronics industry. Time is of the essence and we need to act fast. The writer is president, Dell India.