The Indian government is reportedly weighing a fresh set of subsidies and tariff reductions aimed at bolstering domestic electronics manufacturing, particularly for components used in smartphones. According to sources familiar with the discussions, the Ministry of Electronics and Information Technology (MeitY) has proposed a subsidy package worth ₹230 billion ($2.7 billion) for component makers, covering essential parts like batteries, camera modules, and microprocessors.
Proposed Incentives and Tariff Reforms
The subsidy plan, if approved, will support manufacturers of key electronic components, including:
- Microprocessors
- Memory and storage devices
- Multi-layered printed circuit boards (PCBs)
- Camera components such as lenses
- Lithium-ion cells
In addition to the subsidies, MeitY has recommended lowering import tariffs on specific electronic parts, addressing a long-standing demand from the industry. Lower tariffs would help reduce production costs, making locally manufactured electronics more competitive on the global stage. India’s current tariff on electronic components ranges from 0% to 20%, which is 5%-6% higher than that of competitors like China and Malaysia, according to research by Niti Aayog, a government think-tank.
Final Decision Expected in February Budget
A final decision on these proposals will be made by the Union Cabinet, with potential announcements expected during the Union Budget in February 2025. If implemented, this move is expected to significantly enhance India’s electronics manufacturing ecosystem by reducing dependency on imports, particularly from China.
Building on Previous Successes
The proposal comes on the back of the government’s earlier Production-Linked Incentive (PLI) schemes, which have attracted global giants like Apple and Samsung to set up manufacturing bases in India. As a result, Apple’s iPhone exports from India have grown rapidly, positioning the country as a major player in the global smartphone supply chain.
Prime Minister Narendra Modi’s administration now seeks to deepen that success by creating a broader domestic supply chain for electronics. “This is one of the major ways to incentivize companies to get into global value chains,” said Madhavi Arora, lead economist at Emkay Global Financial Services, adding that while the impact may only be visible in the medium to long term, it is a necessary step toward achieving global competitiveness.
Competing with Global Manufacturing Hubs
India faces stiff competition from countries like Vietnam, which have been successful in attracting foreign investments by offering lower tariffs and better fiscal incentives. In its report last year, Niti Aayog emphasized the need for India to rationalize tariffs and provide fiscal support to strengthen its electronics manufacturing sector.
With global companies increasingly looking to diversify supply chains away from China, India has a unique opportunity to position itself as a manufacturing hub. However, experts believe that for India to truly compete with established players, it must offer a combination of cost efficiency, world-class infrastructure, and policy support.