India Approves $3B Incentive to Boost Electronics Manufacturing

The finance ministry has approved an incentive scheme of almost $3 billion (around 25,000 crore) designed to boost local production of electronic components.

Conversations between the Ministry of Electronics and IT (MeitY)—the key ministry for the initiative—and the Finance Ministry originally targeted a budget of Rs 30,000-40,000 crore. However, the finance ministry agreed on a reduced figure after receiving industry estimates on investments, demand, and production, according to the officials.

Government officials aware of the issue indicated that the proposal is expected to receive cabinet approval later this month before its implementation begins in April. As part of the scheme, electronic components valued at $50-60 billion are projected to be manufactured during the five-to-six-year duration of the scheme, they said.

The finance ministry aimed to confirm that the whole fund pool is completely utilized, in contrast to the production-linked incentive (PLI) schemes for smartphones and IT hardware, which have seen underutilization of their budgets.

The scheme aims to establish a comprehensive ecosystem for component manufacturing, as India's demand for electronic components is projected to rise to $240 billion by 2030, up from $45.5 billion in 2023, driven by the growing local production of mobile phones, as stated in a report by the Confederation of Indian Industry. Officials stated that the government’s goal is to increase local value addition in electronics manufacturing to 35-40% over the scheme’s duration and eventually achieve 50% of the total non-semiconductor bill of materials, up from the current 15-18%.

The scheme’s emphasis on local value addition has lagged, despite the rapid growth in electronic final assembly under the current PLI schemes. The scheme is anticipated to cover the production of parts such as printed circuit boards (PCBs), camera modules, display assemblies, lithium-ion cells, speakers, vibrator motors, and mechanics. Collectively, these elements account for roughly 50% of the bill of materials in a laptop or a mobile phone.

The CII report highlighted battery components and sub-assemblies, camera modules, mechanical parts, displays, and PCBs as top priorities for India. Together, they represented 43% of the component demand in 2022, with their value projected to rise to $51.6 billion by 2030.