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Having completed the cycle of electronics manufacturing with the latest initiative of incentivising components, the government’s next step would be to focus on designing their software in the country, electronics and IT minister, Ashwini Vaishnaw told FE. “Once that happens, the backward and forward integration would be complete,” he added.
Explaining the rationale for the software designing part, Vaishnaw said that the electronics component manufacturing scheme approved by the Union Cabinet last week, targets the hardware side of the electronics ecosystem, focusing on passive components and sub-assemblies critical for manufacturing electronic devices.
“Once the software design starts happening in the country, it would cover the entire value chain of electronics production, from raw materials and components to finished hardware and the software that powers it,” Vaishnaw said.
Simply put, it means that not only components such as printed circuit boards, lithium-ion battery cells, sub-assemblies for display and camera modules, would then be made in India, their software designing would also start happening here.
“We started with smartphones, moved to IT hardware, semiconductor, and with electronics components, the manufacturing cycle is now complete. Once software design also starts in the country, full backward-forward integration would happen,” the minister said, adding that this integrated approach could transform India from a manufacturing hub into a full-fledged electronics system design and manufacturing (ESDM) centre.
According to Vaishnaw, to achieve this the partnership between the academia – IITs – and the industry would have to be deepened.
The Rs 22,919-crore incentive scheme announced last week, aims at incentivising domestic production of key electronic components, and will have a tenure of six years. It will attract investments worth Rs 59,350 crore and generate electronic products worth Rs 4.56 lakh crore. Over its duration, it is expected to create 91,600 jobs.
The scheme offers three primary incentives: employment-linked benefits, capital expenditure support, and turnover-based incentives. Each category will have pre-defined turnover targets, determining the incentive structure. Explaining the different incentive structure, Vaishnaw said, “the first one, employment-linked, is for everybody. Only those companies which cross a certain threshold of incremental employment will qualify for incentive. Then, there are certain items where the capex required is very high and the turnover is not corresponding to the capex which goes in. That’s why we have kept capex incentives for certain items. Other items have a turnover-linked incentive”.
He said that the exact percentage of incentives will be worked out when the final contours of the policy are finalised.
On domestic value addition, the minister said, “In just 10 years of domestic manufacturing, we have achieved 20% value addition. The next goal is to double this within five years by strengthening both passive and active component production”.
He also outlined the government’s goal of doubling the country’s electronics exports within the next three-and-a-half to four years.
Last week, FE reported that electronics exports are set to cross the Rs 3 lakh-crore mark in FY25 for the first time. Though the final numbers are yet to be announced, during the April-February period, electronics exports touched Rs 2.87 lakh crore, up 35%, over Rs 2.11 lakh crore during the corresponding period in the previous fiscal. This is when the overall merchandise exports have remained flat for the first eleven months of the current fiscal. In fact, during the current fiscal, electronics has jumped two positions as the third-ranked export, behind engineering goods and petroleum.
Vaishnaw said that the electronics manufacturing sector has grown five times in the last 10 years to Rs 10 lakh crore, providing employment to about 2.5 million people.
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