Electronics industry hopes for budget incentives to boost local manufacturing

NEW DELHI: India’s electronics and semiconductor industry expects a lot of incentives from the upcoming Union Budget FY26, which will mainly focus on increasing domestic value addition in the steadily growing industry, consultants and stakeholders say. said.

With Finance Minister Nirmala Sitharaman scheduled to announce the Budget on February 1st, the consumer electronics retail, manufacturing and design industries will see adjustments in customs duty and income tax structures to favor local ventures, as well as electronic component manufacturing. The company is applying for benefits that include full-scale incentives and support for electronic component manufacturing. private research and development (R&D) teams to manufacture products locally, and the creation of new full-size ports and metropolises to boost consumption and upgrade India’s logistics and distribution network.

Two senior officials working closely with the Ministry of Electronics and Information Technology (Meity) said a proposal has been submitted for a comprehensive incentive scheme for component manufacturing in India’s electronics ecosystem. The exact amount remains at the discretion of the Treasury Department, but two officials cited above said the amount spent was “excessive.” INR10,000 billion ($1.1 billion)” is expected on February 1st.

Also read | India’s $500 billion electronics target: Is the dream too far?

On December 12th, Mint announced that Mitty was valued at $3 billion (approx. INR30,000 billion in incentive spending to strengthen domestic parts manufacturers, product research and development, design, and intellectual property. On January 2, the Mint also said that the net cumulative revenue of India’s electronics industry will not reach $150 billion in calendar year 2024, and the Centre’s target of making the industry’s revenue $500 billion by 2030 is Reported to be ambitious.

The slow pace of growth and low value creation in the electronics industry are major concerns. Industry experts say that since India’s electronics manufacturing services (EMS) sector primarily assembles products, only “about 15%” of its revenue (and therefore considered domestic value addition) remains in India. said.

Ashok Chandak, chairman of the Indian Electronics and Semiconductor Association, an industry group, said limited value creation was the main concern. “We aim to chart a path to increasing local electronics market revenue to $500 billion, but the main goal must be domestic value addition.Currently, local value creation still accounts for around 15%. We need to increase this by at least 30%, or even more in certain categories of the industry. To do this, a comprehensive component incentive plan is key,” Chandak said. .

Also read | Mint Primer: Why is private R&D important in electronics?

Chandak added that a second round of incentives for the Indian Semiconductor Mission is also planned in the next FY26 budget. On September 10, the Mint reported that a second round of semiconductor incentives amounting to $15 billion had been submitted for cabinet approval.

Nitin Kunkolienker, chairman of industry association Information Technology Manufacturers Association (Mait), said the key demands from the industry include “improving the import duty structure for various key electronic components to increase the competitiveness of the industry. It includes demands for rationalization.” Attractive to local manufacturing. ”

“Stabilizing the tariff structure is key to demonstrating that India is a more mature manufacturing economy for electronics. Under the current structure, it is difficult for companies to extract the benefits of tariff arbitrage by manufacturing components locally. The center is trying to solve this problem as much as possible. This needs to be fixed soon. Doing this is the only way India can achieve gross domestic value creation of more than 15%, which will enable India to join the global value chain in a comprehensive five-year period. It will also allow us to capture a larger portion of the market,” said Kunkolienkar.

He said two key elements were still missing from India’s bid to become a mature electronics economy. “Currently, the best ports in India resemble the worst ports available in China. The result of this disparity is that the largest ships have to enter Colombo and use smaller vessels to transport their containers to India. ”This will result in a significant amount of transportation margin being lost, which can be recovered and generated if India has its own large ports. Furthermore, for India to aim for economic development, it is important to show the number of large cities in the single digits or above. Hub cities like Pune and Mysuru have huge development potential to emerge as the next big cities with all amenities and infrastructure and there is a need to plan to invest in such programs in the next five years. ” he said.

Also read | India’s domestic home appliance market approaches valuation of $100 billion

Kunkorienkar confirmed that proposals for new ports and metropolitan hubs, in which promoting electronics sales and distribution will play a key role, have been submitted to the Ministry of Finance ahead of the 2026 budget.

Chandak said a proposal to set export-based incentive targets has also been submitted to further promote domestic manufacturing and increase the capacity of the domestic EMS sector.

“The proposal proposes a tiered incentive scheme depending on a company’s annual turnover. These incentives could range from 1% to 4% of a company’s export margin and “It can significantly boost cash flow and attract more business to India,” he said.