Electronics Manufacturing

Electronics Manufacturing in India: Achievements, Challenges, and Pathways Forward

Core Tension: Import Dependency vs. Indigenous Value Addition

The electronics manufacturing sector in India is at a critical juncture, where the tension between import dependency and indigenous value addition is driving policy interventions. While initiatives like the Production Linked Incentive (PLI) scheme and the Semicon India Program aim to enhance India's domestic electronics ecosystem, the country remains reliant on imports for critical components like semiconductors. This challenge underscores India's need to balance rapid production growth with deep, structural capacity building to strengthen supply chain resilience.

UPSC Relevance Snapshot

• GS-III: Economy — Industrial growth, Make in India initiative, trade deficit reduction.
• GS-III: Science and Technology — Semiconductor ecosystem, innovation in technology.
• GS-II: Governance — Role of government schemes like PLI and SPECS.
• Essay: Economic self-reliance through manufacturing and technology.

Arguments For: Why Electronics Manufacturing is a Strategic Priority

India's electronics sector holds immense strategic and economic importance, as highlighted by its rapid growth over the past decade. Advocates of these interventions point to clear achievements and future potential.

Key Rationale: Electronics manufacturing is both a growth driver and a strategic imperative due to its impact on trade balances, employment generation, and technological sovereignty. The sector is pivotal for India's energy transition (solar components) and defense modernization.

• Export Growth: According to Ministry of Commerce data, electronics exports grew from ₹38,000 crore in FY 2014-15 to ₹2.41 lakh crore in FY 2023-24 at a CAGR of 20%.
• Job Creation Potential: The Electronics Component Manufacturing Scheme alone is projected to generate 91,600 direct jobs and numerous indirect ones.
• Supply Chain Diversification: Geopolitical shifts post-COVID-19 have incentivized global players like Apple to localize production in India.
• Semiconductor Ecosystem: The government approved ₹1.52 lakh crore in investment under five semiconductor projects (Economic Survey 2024-25).

Arguments Against: Persistent Gaps and Challenges

Despite visible progress, several structural challenges undermine the potential of India's electronics manufacturing sector. Critics argue that the over-reliance on policy incentives without addressing deeper constraints may undercut long-term gains.

Key Argument: High import dependency, insufficient R&D investment, and gaps in infrastructure create vulnerabilities in India's electronics manufacturing ecosystem, undermining the sustainability of current growth.

• Import Dependency: Domestic value addition in electronics barely reaches 15-20% compared to China's 38%, and India remains highly reliant on semiconductor imports.
• Infrastructure Deficiencies: The World Bank finds Indian logistics costs to be 13% of GDP, compared to global best practices of 8%.
• Skilled Labour Shortages: As per the Economic Survey 2023-24, India lacks adequate expertise in VLSI design and advanced semiconductor fabrication.
• R&D Lag: India's R&D spending stands at 0.65% of GDP, lower than South Korea (4.5%) and Taiwan (3.3%) per UNESCO UIS data.

Comparative Table: India vs China in Electronics Manufacturing

Factor	India	China
Domestic Value Addition	15-20%	38%
Annual Electronics Exports	₹2.41 lakh crore (2023-24)	Approx. ₹20 lakh crore
Semiconductor Ecosystem Development	Emerging (₹76,000 crore outreach under Semicon India Program)	Mature and Advanced
R&D Investment as % of GDP	0.65%	2.4%
Global Market Share	3%	25%

What the Latest Evidence Shows

The latest Global Investors Summit 2025 announced that India will complete its first indigenous semiconductor chip production by the end of the year, marking a breakthrough in reducing import reliance. Simultaneously, India's trade deficit with China touched an all-time high of $100 billion in FY 2024-25, underscoring the urgency of advancing local electronics ecosystems. Moreover, the recent increase in budget allocation for electronics manufacturing—from ₹5,747 crore in FY 2024-25 to ₹8,885 crore in FY 2025-26—indicates growing government commitment.

Structured Assessment of Electronics Manufacturing Policy

• Policy Design: Schemes like PLI and SPECS show clear intent and focus on incentivizing production, but lack policy convergence and coordinated R&D investment.
• Governance Capacity: Existing institutional frameworks need decentralization and public-private partnerships for better implementation and monitoring.
• Behavioural and Structural Factors: A reliance on foreign players like Apple and Samsung might create inequities, while insufficient upskilling programs hinder labor market alignment with technological needs.

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