India readies Rs. 25,000 crore (US$ 2.92 billion) boost for its electronics components industry
- IBEF
- January 7, 2025
The Finance Ministry has approved an incentive scheme of nearly Rs. 25,000 crore (US$ 2.92 billion) to promote the local manufacturing of electronic components. This proposal will receive cabinet approval later this month and will be rolled out in April. The scheme aims to generate Rs. 4,28,000 – 5,13,600 crore (US$ 50-60 billion) worth of electronics components over its five-to-six-year duration. Initially, discussions between the Ministry of Electronics and Information Technology (MeitY) and the Finance Ministry suggested an outlay of Rs. 30,000-40,000 crore (US$ 3.50 - 4.67 billion). However, the final allocation was reduced based on estimates provided by the industry regarding investments, demand, and production. Unlike previous schemes where outlays were underutilized, the government wants to ensure that the entire fund is used.
The new scheme will offer varying incentives depending on the product's manufacturing constraints and localisation levels. Products with higher manufacturing challenges than countries like China and Vietnam will attract more incentives. The scheme differs from the smartphone Production-Linked Incentive (PLI) programme, as components and subassemblies are more capital-intensive, requiring substantial investment to build a comprehensive manufacturing ecosystem. The domestic electronics industry has also requested reduced customs duties on select smartphone parts, arguing that high duties negate the impact of incentives. India’s demand for electronic components is expected to surge to Rs. 20,54,400 crore (US$ 240 billion) by 2030, up from Rs. 3,89,480 crore (US$ 45.5 billion) in 2023, driven by local mobile phone production. The target is to increase local value addition in electronics manufacturing to 35-40% during the scheme's tenure, eventually covering 50% of the non-semiconductor material bill.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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