Buoyed by the success of localised assembly of finished electronic products such as smartphones, the Modi government is likely to come out with a ₹40,000-crore scheme incentivising electronic component manufacturing.

Officials indicated that discussions are in the initial stages and various options are being looked into. They said the government is exploring various incentive models, including subsidies for operational expenditure, capital expenditure, or a combination of both, depending on the specific component category.

The new policy will build upon the success of the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), which concluded in March 2024. The industry has called for a more robust scheme with increased scale and higher incentives.

The government’s ambitious goal is to increase domestic value addition in electronics components from the current 15-18 per cent to 35-40 per cent initially, with a long-term target of 50 per cent.

However, the electronics industry has raised concerns about the government’s employment targets, arguing that the sector is highly mechanised and automated. The government is working to find a balance between incentivising manufacturing and jobs.

The new policy is also expected to address the growing demand for electronic components, estimated to reach $160 billion by 2028-29. India’s current domestic production capacity is significantly lower, highlighting the need for a robust domestic manufacturing ecosystem.

The government’s stance on Chinese companies has evolved, with blanket bans giving way to conditional joint ventures with Indian firms.