ELECTRONICS MANUFACTURING – ECONOMY
NEWS: 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.
WHAT’S IN THE NEWS?
Salient Features of the Scheme
1. Total Outlay
• The scheme has been allocated a total budget of ₹22,919 crore over a period of six years, aiming to boost domestic electronic component manufacturing.
2. Target Components
• The scheme focuses on incentivizing the production of critical electronic components, including:
Display modules – Essential for screens and panels in various electronic devices.
Camera sub-assemblies – Used in smartphones, surveillance systems, and other imaging equipment.
Printed circuit board assemblies (PCBAs) – Core components in nearly all electronic products.
Lithium cell enclosures – Integral to battery technology for mobile devices and electric vehicles.
Resistors, capacitors, and ferrites – Fundamental elements for circuit design and electronic stability.
3. Employment Generation
• The initiative aims to create approximately 91,600 direct jobs over the implementation period, thereby strengthening the domestic workforce in the electronics manufacturing sector.
4. Types of Incentives
• The scheme provides three types of incentives to encourage investment and production:
Operational Incentives – Directly linked to incremental sales, following a model similar to the Production Linked Incentive (PLI) scheme.
Capital Incentives – Based on eligible capital expenditure (CapEx) to support infrastructure and manufacturing setup.
Combination Incentives – A structured mix of operational and CapEx-based incentives to offer financial viability for manufacturers.
5. Eligibility Criteria
• The scheme is open to both greenfield and brownfield projects, ensuring flexibility for new and existing manufacturing facilities.
• It allows foreign entities to participate through technology transfer agreements or by forming joint ventures with Indian companies to enhance domestic capabilities.
6. Incentive Structure
• The annual financial payouts under the scheme will range from ₹2,300 crore to ₹4,200 crore, depending on the achievement of key performance indicators such as:
Investment in manufacturing infrastructure.
Volume of production.
Employment generation targets.
Present Status of Electronic Component Manufacturing in India
1. Market Growth
• India’s electronics manufacturing sector is projected to expand at a growth rate of 15%, reaching a market size of $115 billion in 2024.
2. Mobile Phone Production
• The total value of mobile phone production in India is expected to exceed $50 billion by March 2024, a substantial increase from $42 billion in the previous financial year.
3. Import Dependency
• In the April-June 2024 quarter, India’s electronic goods imports surpassed $20 billion for the fifth consecutive quarter.
• Over 50% of these imports consisted of electronic components and computer hardware, reflecting continued dependency on foreign suppliers.
4. Export Performance
• India’s electronics exports surged to $29.12 billion in the 2023-24 fiscal year, marking an impressive 23.6% increase from the previous year.
• The growth in exports is largely attributed to:
Expansion of smartphone production in India.
The success of the PLI program, which has incentivized large-scale production.
Key Challenges
1. Limited Domestic Scale
• The current manufacturing capacity of electronic components in India remains inadequate to meet the rapidly increasing domestic demand, necessitating continued reliance on imports.
2. High Investment-to-Turnover Ratio
• Unlike smartphone assembly, which offers a high turnover ratio of ₹20 per rupee invested, electronic component manufacturing generates only ₹2-4 turnover per rupee invested.
• This makes component production less financially attractive compared to final product assembly.
3. Continued Import Dependency
• Despite initiatives such as the PLI scheme, India’s electronic goods imports have consistently remained above $20 billion per quarter, highlighting the nation’s persistent reliance on imported components.
Way Forward
1. Encouraging Scale and Investments
• The government should facilitate large-scale investments by providing:
Targeted financial incentives to attract global manufacturers.
Dedicated electronic manufacturing clusters to lower costs and achieve economies of scale.
2. Strengthening the Manufacturing Ecosystem
• Enhancing domestic production requires:
Collaboration between Indian and global firms through joint ventures.
Technology transfer agreements to bring advanced manufacturing techniques to India.
3. Skill Development for Workforce Enhancement
• Specialized skill development programs should be implemented to:
Train workers in high-tech electronics manufacturing.
Bridge the skill gap required for sustained job creation in the industry.
4. Boosting Research and Development (R&D)
• To drive innovation and technological self-reliance, the government must:
Provide policy support and financial incentives for R&D initiatives.
Strengthen industry-academia collaborations to enhance domestic capabilities in electronic design and production.
5. Export-oriented Growth Strategy
• A well-defined roadmap for global competitiveness should be developed by:
Expanding India’s presence in global electronic supply chains.
Strengthening export infrastructure to enhance long-term sustainability in electronic component manufacturing.
Conclusion
• The effective implementation of the proposed incentive scheme is crucial for strengthening India’s position as a global electronics manufacturing hub.
• It has the potential to:
• Reduce dependency on imports, ensuring greater self-sufficiency in electronic components.
• Create substantial employment opportunities, supporting workforce expansion.
• Drive economic growth, boosting India’s manufacturing and export competitiveness in the global electronics industry.