Syllabus: GS3/Economy
Context
- India has attracted global smartphone makers like Apple and Samsung due to a large talent pool, government subsidies, and geopolitical factors pushing companies to diversify from China.
About
- After successfully being able to localise smartphone assembly in the country for domestic consumption and some exports, the government has shifted its focus to deepening local value addition in the sector.
- The key target: Driving up local value addition in the sector, reducing India’s import dependence on countries like China, and creating good quality jobs.
- Currently, the domestic value addition stands at around 15-20%, with the government hoping to double that in the coming years (China’s current value addition in the sector is around 38%).
- Worryingly, India’s trade deficit with China reached an all-time high in 2024-25, nearing $100 billion.
Electronics Sector
- The electronics sector encompasses the design, manufacturing, and marketing of electronic components and systems.
- Electronics is one of the highest-traded and fastest-growing industries globally and is expected to play a pivotal role in shaping the global economy.
- Since electronics permeates all sectors of economy it has economic and strategic importance.
India’s Electronic Sector
- Domestic Production: It has increased from Rs.1.90 lakh crore in FY 2014-15 to Rs.9.52 lakh crore in FY 2023-24 at a CAGR of more than 17%.
- Exports: The exports of electronic goods have also increased from Rs.0.38 lakh crore in FY 2014-15 to Rs.2.41 lakh crore in FY 2023-24 at a CAGR of more than 20%.
- India is the second largest mobile phone producer in the world.
- India’s semiconductor ecosystem has gained significant momentum, with five landmark projects receiving approval with a total combined investment nearing Rs 1.52 lakh crores.
- Future Projections: It indicates that India’s electronics production will reach USD 300 billion by 2026.
Challenges
- Dependence on Imports: High reliance on imported components, especially semiconductors, increases costs and supply chain vulnerabilities.
- Infrastructure Gaps: Inadequate infrastructure for large-scale manufacturing and logistics hampers efficiency.
- Skilled Labor Shortage: Limited availability of skilled workers for advanced manufacturing processes and R&D.
- High Capital Investment: Significant investment required for setting up world-class manufacturing facilities, making entry challenging for new players.
- Technology Gaps: Lack of cutting-edge technology and innovation in certain segments of the electronic value chain.
- Competition from Global Players: Intense competition from established global electronics manufacturers and countries with lower production costs.
Government schemes for the Electronics boom in India:
- Make in India: launched in 2014, aimed at boosting India’s manufacturing sector and economic growth.
- Transform India into a global hub for design and manufacturing.
- Phased Manufacturing Programme (PMP): Launched in 2017, aimed to promote domestic value addition in mobile phones and their parts.
- Increased investment and set up significant manufacturing capacities in India.
- Production Linked Incentive (PLI) Scheme: Introduced in 2020, aimed to boost domestic manufacturing in mobile phones, electronic components, and semiconductor packaging.
- Incentives: 3% to 6% on incremental sales (over base year) for eligible companies.
- Duration: 5 years.
- Semicon India Program: Launched in 2021 with a financial outlay of ₹76,000 crore, it is structured to promote the domestic semiconductor industry through incentives and strategic partnerships.
- At Global Investors Summit 2025, it was announced that India’s first indigenous semiconductor chip will be ready for production by 2025.
- The Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS): The scheme will provide financial incentive of 25% on capital expenditure for the identified list of electronic goods that comprise downstream value chain of electronic products.
- Increased Budget: Allocation for electronics manufacturing rose from ₹5,747 crore (2024-25) to ₹8,885 crore (2025-26), highlighting the government’s commitment to industrial growth.
- Electronics Component Manufacturing Scheme: The Union Cabinet chaired by the PM approved the Electronics Component Manufacturing Scheme with a funding of Rs.22,919 crore to make India Atmanirbhar in the electronics supply chain.
- Tenure of six years with a one-year gestation period.
- Expected Outcomes:
- Attract an investment of Rs.59,350 crore.
- Result in production of Rs.4,56,500 crore.
- Generate 91,600 direct jobs and numerous indirect jobs.
Conclusion
- India’s rapid transformation into a global electronics manufacturing hub is a testament to the success of the Make in India initiative.
- With numerous schemes to support the manufacturing processes in India, the country has significantly boosted local manufacturing, exports, and investment.
- Aiming for USD 300 billion in electronics production by 2026, India is positioning itself as a major hub in the electronics and semiconductor industries.
Source: IE