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The Indian government’s initiatives, particularly the PLI schemes and infrastructure development efforts, provide a strong impetus for the growth of domestic electronics manufacturing. The Indian government has been actively promoting the growth of domestic electronics manufacturing through various strategic initiatives. These efforts aim to reduce reliance on imports, create employment opportunities, enhance technological capabilities, and position India as a global hub for electronics production.
Key among these initiatives are the Production Linked Incentive (PLI) schemes and the development of robust infrastructure. This article will analyze these initiatives and assess their potential impact on the Indian electronics manufacturing landscape.
Production Linked Incentive (PLI) Schemes: A Catalyst for Growth
The Production Linked Incentive (PLI) schemes have emerged as a cornerstone of the government’s strategy to boost domestic manufacturing across various sectors, including electronics.
These schemes provide financial incentives to companies based on their incremental sales and investments in manufacturing within India. For the electronics sector, several PLI schemes have been introduced, each targeting different segments of the value chain.
PLI for Large Scale Electronics Manufacturing
Notified on April 1, 2020, this scheme aims to attract large investments in mobile phone manufacturing and specified electronic components. It offers incentives ranging from 3% to 6% on incremental sales (over the base year) of goods manufactured in India to eligible companies for a period of five years.
This scheme has been instrumental in transforming India from a net importer to a net exporter of mobile phones. Domestic mobile phone production surged from 5.8 crore units in 2014-15 to 33 crore units in 2023-24, significantly reducing import dependence.
PLI Scheme 2.0 for IT Hardware
Launched to enhance India’s manufacturing capabilities and exports in the IT hardware segment, this scheme offers an average incentive of around 5% on net incremental sales (over the base year) of goods manufactured in India for six years.
The target segments include laptops, tablets, all-in-one PCs, servers, and ultra-small form factor devices. This scheme also incentivizes the localization of components and sub-assemblies, including semiconductor design, IC manufacturing, and packaging.
Electronics Components Manufacturing Scheme (ECMS)
It offers tailored incentives through turnover-linked, capex-linked, and hybrid models. The ECMS targets various sectors, including consumer electronics, medical devices, automobiles, power electronics, and telecom. It is projected to attract investments of ₹59,350 crore and generate a production output of ₹4,56,500 crore, creating 91,600 direct jobs.
The impact of these PLI schemes is already visible. By November 2024, the PLI schemes across 14 key sectors had attracted investments of around ₹1.61 lakh crore, leading to production/sales of approximately ₹14 lakh crore and the creation of over 11.5 lakh jobs.
In the electronics sector specifically, these schemes have encouraged global players like Apple and Samsung to expand their manufacturing bases in India and have spurred domestic companies like Dixon Technologies to increase their value addition by manufacturing more components locally.
Infrastructure Development: Building the Foundation
Along with financial incentives, the government is also focusing on developing robust infrastructure to support electronics manufacturing. This includes the establishment of Electronic Manufacturing Clusters (EMCs) and improvements in logistics and connectivity.
Electronics Manufacturing Clusters (EMC) Scheme
The EMC scheme was launched to provide support for creating world-class infrastructure for the Electronics Systems Design and Manufacturing (ESDM) sector. It offers financial assistance for setting up greenfield and brownfield EMCs.
Greenfield EMCs in undeveloped areas can receive 50% of the project cost (up to ₹50 crore per 100 acres), while brownfield EMCs can receive 75% of the project cost (up to ₹50 crore per project).
Under this scheme, 19 greenfield EMCs and 3 Common Facility Centres (CFCs) have been approved across India, covering a total land area of 3,464 acres with a total grant-in-aid of ₹1,470 crore.
These clusters aim to provide state-of-the-art facilities, logistics support, and access to raw materials and skilled labor, creating a conducive environment for electronics manufacturing units. States like Tamil Nadu, Karnataka, and Uttar Pradesh are emerging as key EMS hubs due to these infrastructure developments.
Logistics and Connectivity
Recognizing that efficient logistics are crucial for a thriving manufacturing sector, the government is also working on improving transportation and connectivity through initiatives like Bharatmala, Sagarmala, and PM Gati Shakti.
Upgrading ports, airports, and road networks, along with establishing dedicated freight corridors, will reduce delays and lower logistics costs, enhancing India’s competitiveness as a manufacturing destination. The development of advanced cargo handling facilities with automated processes and real-time tracking is also being emphasized.
Potential Impact: A Transformative Outlook
The combined effect of the PLI schemes and infrastructure development initiatives holds significant potential to transform India’s electronics manufacturing sector.
Increased Domestic Production and Reduced Import Dependence
The PLI schemes, particularly the ECMS, are aimed at deepening domestic value addition by encouraging the local manufacturing of critical components.
This will reduce India’s reliance on imports from countries like China, Taiwan, and South Korea, making the domestic supply chain more resilient to global disruptions. Industry estimates suggest that localizing even half of the critical component manufacturing could save billions in foreign exchange.
Job Creation
These initiatives are expected to generate substantial employment. The ECMS alone is projected to create 91,600 direct jobs. As the electronics manufacturing ecosystem expands, it will also lead to numerous indirect employment opportunities in related sectors.
Enhanced Exports
By boosting domestic production and component manufacturing, India can significantly enhance its electronics exports. The target of achieving $300 billion in electronics production by 2026, with exports of $120-140 billion, underscores this ambition.
The PLI schemes have already shown positive results in increasing electronics exports, and the focus on component manufacturing will further strengthen India’s position in the global value chain.
Technological Advancement and Innovation
The schemes also encourage investments in technology and R&D. The inclusion of semiconductor design, IC manufacturing, and packaging in the PLI for IT hardware, along with the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), aims to build indigenous technological capabilities and foster innovation within the sector.
Global Hub Potential
With consistent policy support, financial incentives, and infrastructure development, India is well-positioned to emerge as a major global hub for electronics manufacturing. The increasing interest of multinational corporations in setting up and expanding their manufacturing operations in India is a testament to this potential.
Challenges and the Way Forward
Despite the positive momentum, some challenges need to be addressed to fully realize the potential of these initiatives. These include:
- Supply Chain Dependencies: While efforts are being made to boost local manufacturing, India still relies on imports for certain advanced components and raw materials. Further focus on developing a comprehensive domestic supply chain is crucial.
- Infrastructure and Logistics Gaps: While the EMC scheme is a step in the right direction, continuous improvement in logistics, power supply, and connectivity is needed to support high-volume manufacturing.
- Skill Development: A skilled workforce is essential for a thriving electronics manufacturing sector. Continued investment in training and skill development programs is necessary to meet the industry’s growing demands.
- Regulatory Environment: Streamlining regulatory processes and ensuring ease of doing business will further attract investments and facilitate growth.
The Indian government’s initiatives, particularly the PLI schemes and infrastructure development efforts, provide a strong impetus for the growth of domestic electronics manufacturing.
These strategic interventions are expected to enhance production, create jobs, boost exports, and position India as a significant player in the global electronics value chain. By addressing the existing challenges and maintaining a supportive policy environment, India can achieve its vision of becoming a global electronics manufacturing hub.
- Published On May 15, 2025 at 08:46 AM IST
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