India’s Finance Ministry has approved a groundbreaking incentive program worth Rs. 25,000 crore (US$ 2.92 billion) to drive local manufacturing of electronic components. This plan, which is expected to be finalized by the cabinet later this month, is set to roll out in April. Its primary objective is to generate an estimated US$ 50-60 billion worth of electronic components over the next five to six years. Originally, talks between the Ministry of Electronics and Information Technology (MeitY) and the Finance Ministry pointed to a much higher budget of Rs. 30,000-40,000 crore (US$ 3.5-4.67 billion), but this figure was reduced following industry feedback on anticipated investments, demand, and production capacity.
The new scheme will offer incentives based on the product’s manufacturing complexity and the extent of its local production. Items with manufacturing challenges greater than countries like China and Vietnam will be eligible for larger incentives. Unlike the smartphone Production-Linked Incentive (PLI) program, which focuses on phones, the new initiative covers components and subassemblies, which are more capital-intensive and require significant investment to develop a complete manufacturing infrastructure. Moreover, the domestic electronics sector has asked the government to lower customs duties on specific smartphone parts, arguing that high duties diminish the benefits of the incentive scheme.
India’s demand for electronic components is projected to skyrocket to Rs. 20,54,400 crore (US$ 240 billion) by 2030, up from Rs. 3,89,480 crore (US$ 45.5 billion) in 2023, largely driven by growth in local mobile phone manufacturing. The ultimate goal of the scheme is to increase domestic value addition in the electronics manufacturing sector to 35-40% over its lifespan, eventually covering half of the non-semiconductor material costs.
