Boosting Domestic Manufacturing of Electronic Components in India

Context

Recently, the Government of India has launched a new scheme that aims to reduce import dependency, build a strong component ecosystem, and integrate with Global Value Chains (GVCs).

It also offers differentiated fiscal incentives to encourage domestic and global investments in the electronic components manufacturing sector.

Relevance:

GS-02 (Government policies and interventions)

Objective of the Scheme

Aims to build a robust domestic ecosystem by attracting investments across the value chain to boost Domestic Value Addition (DVA)
To increase India’s share in global electronics exports.
Tackle structural issues like high capital cost, low margins, long gestation periods, and lack of scale

Need for the Scheme

National Security Concern: Heavy reliance on imported components (especially from China and Hong Kong, which account for 56% of India’s electronics imports) raises risks like supply chain disruptions and data vulnerability
Mismatch in Growth: Though India’s electronics production rose from ₹1.9 lakh crore (FY15) to ₹9.52 lakh crore (FY24), the import of components also increased due to weak domestic manufacturing
Strategic Opportunity: China+1: As global companies diversify away from China, India can position itself as a favorable manufacturing hub
Global Market Growth: Electronics is among the fastest-growing global industries, driven by digital transformation and innovation

Prelims Practice Question

Consider the following statements regarding India’s new electronics component manufacturing scheme:

It provides fiscal incentives based on challenges specific to product segments.
It aims to reduce India’s electronics exports and encourage domestic consumption only.
China and Hong Kong together account for over half of India’s imports of electronics and related products.

Which of the statements given above is/are correct?

A. 1 and 2 only

B. 1 and 3 only

C. 2 and 3 only

D. 1, 2 and 3

Answer: B. 1 and 3 only

Note: Statement 2 is incorrect—the scheme aims to increase exports, not reduce them.