Indian electronics Industry and prospects

Electronics Industry Highlights

Electronics industry is the world’s largest and fastest growing industry and is increasingly finding application in all sectors of the economy. The government’s support for the electronics industry has been strong, with numerous conducive policies. The government of India is focusing on manufacturing electronics hardware within India, which seems to be the conceptual origin for both the Make in India and the Digital India programmes. These initiatives encourage domestic manufacturing and exports across the electronics system design and manufacturing (ESDM) value chain. Today India’s production of electronics is estimated at US$ 90 billion and export is estimated to be US$ 23 billion.

Apart from policies like the Make in India initiative, the National Policy on Electronics (NPE) 2019 and Digital India, the Indian government has also backed the sector with the Electronics Development Fund (EDF), the Modified Special Incentive Package Scheme (MSIPS), the Phased Manufacturing Programme (PMP), Preferential Market Access (PMA), and by rationalising the duty structure. The National Policy on Electronics launched by the Indian Government in 2019, targets $400 billion turnovers by 2025 from domestic manufacturing, setting up clusters for the entire value chain, and employing over 10 million people directly or otherwise to achieve a growth rate of 32 percent.

India has emerged as the second largest manufacturer of mobile phones in the world. Over 200 units are manufacturing cellular mobile phones and parts / components thereof in the country, up from only 2 units in 2014. The domestic demand is almost completely being met out of domestic production. India which was importing 90 per cent of its mobile phones till 2014 is now catering to 97 per cent of all mobile phones that are consumed in India.

The electronics sector of India contributes around 3.4% of the country’s Gross Domestic Product (GDP). The government has committed nearly US$ 17 billion over the next six years across various incentive schemes to grow the industry. The Government of India has also worked on making the county investor-friendly and has been laying out the red carpet for manufacturing companies.

By 2026, India has laid out a goal of US$300 billion of manufacturing and US$ 120 billion of exports.

The Government has launched 3 schemes to support the electronics industry of India namely:

  • Production Linked Incentive Scheme (PLI) : The scheme is proposed to offer a production linked incentive of 4% to 6%  to boost domestic manufacturing and attract large investments in mobile phone manufacturing and specified electronic components, including Assembly, Testing, Marking and Packaging (ATMP) units, IT hardware, networking equipment, White goods (ACs & LED) etc.
  • Scheme for Promotion of Manufacturing of Electronics 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, i.e., electronic components, semiconductor/ display fabrication units, ATMP units, specialized sub-assemblies and capital goods for manufacture of aforesaid goods, all of which involve high value added manufacturing. 
  • Electronics Manufacturing Clusters (EMC) 2.0: EMC 2.0 scheme envisages to create quality infrastructure along with industry specific facilities like Common Facility Centers, Ready Factory Sheds / Plug and Play facilities etc.

These schemes are expected to contribute significantly to achieving a $1 trillion digital economy and a $ 5 trillion GDP by 2025.

The Government has announced an outlay of Rs. 3 trillion for the Production Linked Incentive (PLI) Schemes across 14 key sectors including electronics, to create national manufacturing champions and generate employment opportunities for the country’s youth.   PLI scheme offers incentives on incremental sales for products manufactured in India.

India has a very strong manufacturing base for electronics components. Electronic components are considered to be the building blocks for this sector. A proper and impeccable structure of manufacturing electronic components requires a supportive ecosystem and a high capital investment.  India produces high quality electronic components mainly electro-mechanical components (like printed circuit boards, connectors, etc.) and passive components (like wound components, resistors, etc.). Over the years, the active components (like integrated circuits, diodes, etc.) and the associated components (like optical disc, magnets, RF Tuners, etc.) have also witnessed its growth.

India is a global R&D hub and the third largest start-up ecosystem in the world. India is home to 1140+ R&D Centres of Global MNCs employing 900,000+ professionals. India is the preferred investment destination for electronics manufacturing given the low cost of manufacturing combined with the rapid transformation in ease of doing business. 100% FDI is allowed under the automatic route. Under Defence electronics, FDI up to 49% is allowed under automatic route and beyond 49% through government approval.