UPSC CURRENT AFFAIRS – 29th March 2025

Home / UPSC / Current Affairs / Cabinet Clears ₹22,919-Cr Scheme to Boost Electronics Components Manufacturing

Cabinet Clears ₹22,919-Cr Scheme to Boost Electronics Components Manufacturing

Why in News?

On March 28, 2025, the Union Cabinet approved a new incentive scheme worth ₹22,919 crore for the domestic manufacturing of electronic components. Spread over six years, the scheme is expected to:

  • Generate ₹4.56 lakh crore worth of production,
  • Attract ₹59,350 crore in fresh investments,
  • Create 91,600 direct jobs, with incentives directly linked to job creation.

What the Scheme Aims to Do

This scheme is part of a strategic push to build a self-reliant electronics ecosystem in India — a sector historically dominated by China and East Asia.

Objectives:

  • Strengthen domestic value chains in electronics.
  • Reduce dependency on imported components.
  • Enable export competitiveness through scale and quality.
  • Encourage large-scale job creation.

Targeted Components:

  • Display modules
  • Sub-assembly camera modules
  • PCB (Printed Circuit Board) assemblies
  • Lithium cell enclosures
  • Resistors, capacitors, ferrites

These are core components for devices like smartphones, laptops, TVs, microwave ovens, and other appliances.

Key Concepts

  • Domestic Value Addition
    • Refers to the portion of value created within the country during the production of goods.
    • India’s value addition in electronics is currently just 15–20%.
    • The goal is to push this to 30–40%, by producing core components in-house, not just assembling imported parts.
    • By contrast, China’s domestic value addition stands at around 38%.
  • Import Substitution vs Export Orientation
    • Import Substitution: Making at home what we currently import — a defensive approach.
    • Export-Led Growth: Producing at scale for global markets — a proactive and sustainable strategy.
    • Minister Ashwini Vaishnaw emphasized a shift away from import substitution and towards export promotion, as viability improves with scale.
  • Investment-to-Turnover Ratio
    • In smartphone assembly: ₹1 invested returns ₹20 in production.
    • In component manufacturing: ₹1 invested yields only ₹2–₹4.
    • Hence, component manufacturing is riskier and slower to yield profits, which is why government intervention is necessary to de-risk private investment.

Why This Scheme is Crucial Now?

India’s Heavy Import Dependency

  • Electronics is India’s second-largest import category after oil.
  • Imports of key components like integrated circuits rose from $29 billion (FY21) to $46.5 billion (FY23).
  • In 2022–23, India’s component production was just $10.75 billion, while demand is expected to hit $160 billion by 2028–29.

The Demand-Supply Gap

  • Internal estimates show a $100 billion+ gap in domestic demand.
  • To plug this, India needs component production growth of over 50% CAGR — not achievable without a structured incentive program.

Policy Differentiation from Previous Schemes

This is not a simple repeat of the earlier PLI (Production Linked Incentive) scheme. Here’s how it’s different:

Feature

PLI Scheme

New Components Scheme

Focus

Finished products (e.g. phones)

Core components

Incentive Linkage

Based on production/output

Based on jobs, capex, production

Value Addition Achieved

15–20%

Targeting 30–40%

Export Orientation

Moderate

Strong push towards exports

Global Context and Geostrategic Relevance

  • China dominates global component manufacturing but is facing pushback due to supply chain concerns, tariffs, and geopolitical tensions.
  • Countries like the US, Japan, and EU are looking to diversify supply chains.
  • India has a rare window of opportunity to position itself as a trusted alternative — but this requires scale, skill, and policy continuity.

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