Electronic Subsidy Scheme for Component Manufacturing in India

The Indian government has finalized a ₹22,919 crore incentive scheme to bolster electronic component manufacturing over six years. 

• This initiative aims to enhance domestic value addition and generate significant employment by focusing on critical electronic components. ​

Salient Features of the Scheme

• Total Outlay: ₹22,919 crore over six years.​
• Target Components: Display modules, camera sub-assemblies, printed circuit board assemblies, lithium cell enclosures, resistors, capacitors, ferrites, etc.​
• Employment Generation: Aims to create approximately 91,600 direct jobs over the implementation period.​
• Incentive Types:
  • Operational Incentives: Linked to incremental sales, similar to existing Production Linked Incentive (PLI) schemes.​
  • Capital Incentives: Based on eligible capital expenditure (CapEx).​
  • Combination Incentives: A mix of operational and CapEx-based incentives.​
• Eligibility: Both greenfield and brownfield projects, allowing participation by foreign entities through technology transfer agreements or joint ventures with Indian firms.​
• Incentive Structure: Annual payouts ranging from ₹2,300 crore to ₹4,200 crore, contingent upon achieving annual targets related to investment, production, and employment.​

Present Status of Electronic Component Manufacturing in India

• Market Size: India’s electronics manufacturing sector is projected to grow by 15% to reach $115 billion in 2024. 
• Mobile Phone Production: Expected to surpass $50 billion by March 2024, up from around $42 billion in the previous financial year.
• Import Dependency: In the April-June 2024 quarter, India’s electronic goods imports exceeded $20 billion for the fifth consecutive quarter, with electronic components and computer hardware accounting for over half of these imports.
• Export Growth: India’s electronics exports reached $29.12 billion in the 2023-2024 fiscal year, marking a 23.6% increase from the previous year, driven by smartphone production and the PLI program.

Key Challenges

• Limited Domestic Scale: Current capacity is inadequate to meet rapidly increasing demand, leading to continued import dependence.​
• High Investment-to-Turnover Ratio: Unlike smartphone assembly, which yields substantial turnover per rupee invested (around ₹20), component manufacturing provides only about ₹2-4 turnover per rupee invested.​
• Import Dependency: Despite initiatives like the PLI scheme, India’s electronic goods imports have consistently topped $20 billion per quarter, indicating a significant reliance on imports. 

Way Forward

• Encourage Scale and Investments: Facilitate large-scale investments through targeted incentives and dedicated manufacturing clusters to achieve economies of scale.​
• Strengthen Ecosystem: Foster collaboration between domestic and international companies through joint ventures and technology transfers to build a robust component manufacturing ecosystem.​
• Skill Development: Prioritize capacity-building through focused skill development programs to support job creation and build human resource capability in electronic manufacturing.​
• Research and Development (R&D): Encourage R&D through policy support, financial incentives, and industry-academia collaboration to drive innovation and technological self-reliance.​
• Export-oriented Strategy: Develop a structured roadmap for global competitiveness in electronic component exports to ensure sustainable growth and resilience in domestic manufacturing.​

Conclusion

The successful implementation of the proposed incentive scheme holds the potential to significantly enhance India’s electronics manufacturing capabilities, reduce strategic dependency, and contribute positively to employment generation and economic growth.