UPSC CURRENT AFFAIRS – 29th March 2025
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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