MUMBAI -- An expanding supply-demand gap for electronic products enhances the opportunities for EMS companies in the untapped Indian market, and promises a potential growth rate of 29% compounded annually through 2016, a new study says.

Higher incomes, wider choices, and lower product prices have escalated the demand for electronic products in India and heightened the need to improve the country’s electronics manufacturing ecosystem, leading original equipment manufacturers to turn to electronics manufacturing services providers, says Frost & Sullivan.

New analysis from Frost finds that the market will grow from $3.79 billion in 2012 to $10.67 billion in 2016, a strong compound annual growth rate of 29%.

"As the American and European markets become saturated, global OEMs are looking to invest in Indian businesses and set up manufacturing plants in the country, offering huge potential for EMS providers," said the Frost & Sullivan Measurement and Instrumentation  Analyst . "Proposed Government initiatives to improve the domestic manufacturing sector will also boost market expansion."

EMS companies have high revenue generation possibilities in the telecom, consumer goods and industrial segments. Increasing budgetary allocation in the defense, space and IT sectors will present added growth avenues for Indian EMS enterprises.

These opportunities, however, typically only include orders for product hardware manufacturing, as OEMs prefer to handle software development and designing, thereby limiting revenue inflow.

The lack of fabrication plants and raw materials has forced EMS companies to import a majority of the materials and components from global suppliers, further shrinking profit margins. While on one hand, limited exposure to reverse engineering has restricted the design capabilities of EMS companies, on the other hand, the heavy reliance on foreign OEMs has slowed the pace for market development.

"EMS providers need to supply end-to-end solutions and value-added services to ensure revenue growth," noted the analyst. "Growth-focused policies and government investments to upgrade existing infrastructure will drive the domestic manufacturing market and bridge the supply-demand gap."