India Eyes US$3 Billion Incentive Package to Boost Electronics R&D and Manufacturing

In a significant move to strengthen the domestic electronics sector, the Indian government is developing a US$3 billion incentive package to promote private sector research and development (R&D) and foster the creation of homegrown electronics brands. Spearheaded by the Ministry of Electronics and Information Technology (MeitY), the initiative is a strategic effort to enhance India’s competitiveness in the global electronics market.

Task force recommendations

Find Business Support

Grow Your Presence in Asia with Complete Market Entry and Cross-Regional Support

A task force established by MeitY six months ago has submitted actionable recommendations after assessing the scheme’s viability and market readiness. According to officials, the proposal is under review and will be submitted to the Ministry of Finance for approval. The primary objective is to increase local value addition in the electronics industry—a critical step to elevate India beyond its current status as an assembly hub for global electronics manufacturing services (EMS). Without such initiatives, there are concerns that the growth of EMS players in India could stagnate.

Building a value-added electronics market

The proposed incentives aim to establish a robust domestic electronics market that supports local semiconductor fabs and attracts global players to India’s semiconductor ecosystem. This initiative is seen as essential to prevent the erosion of local brands, a fate that accompanied the rise of Chinese smartphone manufacturers in India.

Industry sources indicate that the incentives would be disbursed in three tranches, calibrated to companies’ revenue levels. These measures align with the government’s long-term vision of increasing India’s share in the US$4.3 trillion global electronics market, where the country accounted for a modest US$155 billion in 2023, according to NITI Aayog.

Industry insights on localization and growth

Speaking to media, Ajai Chowdhry, co-founder of HCL and a veteran in the electronics industry, has emphasized the importance of localized production as a means to drive value addition. He feels that it is timely for India to advance up the value chain by focusing on localizing not only products but also the components within the electronics ecosystem. This would mean incentivizing private sector R&D, fostering the development of systems-on-chips (SoCs), and promoting the domestic design of components.

Growth trajectory and challenges

Related Reading

India’s Exports of Principal Commodities Groups (Electronic Items)

The India Cellular and Electronics Association (ICEA) projects that the industry requires a compound annual growth rate of 22 percent to reach a valuation of US$500 billion by FY 2029-30. Meanwhile, the Confederation of Indian Industry (CII) reports a robust 26 percent annual growth rate, indicating the sector is on track to meet ambitious targets.

However, industry experts highlight challenges in achieving localized R&D for mature supply chains, such as smartphones. They suggest focusing on emerging segments like industrial IoT, hearables, and wearables, where India can create intellectual property (IP) and strengthen local manufacturing capabilities.

Strategic partnerships and technology transfers

To succeed, India must secure technology transfer agreements with foreign entities that go beyond assembly operations to include meaningful technology sharing. Such agreements would enable local companies to generate revenue and position India as a global manufacturing hub while reducing its steep import bill.

Key challenges: Achieving strategic autonomy and expanding role in global value chains

India’s push to expand its electronics industrial capacity comes as global geopolitical tensions reshape supply chains. A well-executed strategy could position India as a leader in the global electronics sector while advancing its goal of strategic autonomy.

Find Business Support

Advance Your China + 1 Asia Manufacturing Strategy with Tailored Business Intelligence

However, the challenges are significant. India currently holds less than 1 percent of the global electronics trade flow (exports) of US$3 trillion that passes through global value chains (GVCs). In comparison, China accounts for 30 percent of GVC electronics exports, with Vietnam and Malaysia also far ahead. Vietnam’s electronics exports are six times higher than India’s, while Malaysia’s exports are nearly four times higher. India’s share of global electronics production is 2 percent compared to Vietnam’s 4 percent while China has a 59 percent share of the US$4.3 trillion market.

Source: Niti Aayog

Electronics companies have urged the government to reassess India’s cost disadvantages compared to rival countries. High import tariffs on components, elevated capital costs, restrictive labor laws, and ongoing ease-of-doing-business challenges remain critical concerns. Companies also cite policy uncertainties, including unexpected duties, as barriers to investment.

Speaking to the Business Standard, a senior executive of a global company eligible for the PLI scheme emphasized the need for competitive cost structures. The executive highlighted how Vietnam and Mexico have capitalized more effectively on supply chain shifts driven by U.S. tariffs and geopolitical factors, leaving India at a disadvantage.

Addressing the roadblocks

Overcoming these challenges will require a concerted effort from the government. Encouragingly, officials appear to be in listening mode, signaling potential adjustments to policies to enhance India’s electronics manufacturing landscape. By addressing these structural issues, India can better position itself to capture a larger share of the global electronics market and achieve its ambitious growth targets.

• Previous Article India Extends IT Hardware Import Management System Until December 31, 2025
• Next Article