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.