Government incentives for India’s electronics industry

12 October 2020

The electronics sector in India has witnessed a meteoric rise since the Government introduced the ‘Make in India’ and the ‘Digital India’ initiatives. Over the last five years, the domestic production of electronics has outweighed imports, and government impetus is the major driving force behind this change. 

In April 2020, the Indian government announced three additional schemes which were notified by the Ministry of Electronics and IT (MeitY) allocating a sum of INR 479.9 billion (~ $6.39 billion) as incentives under the schemes. These incentives are expected to bolster the local production of electronics and promote anchor companies in the major electronics clusters in India. 

The three schemes are:
1) Production Linked Incentive (PLI)
2) Scheme for promotion of manufacturing of components and semiconductors (SPECS)
3) Electronic Manufacturing Clusters (EMC 2.0) 

Manoj Gidwani, a Vice President at management consulting firm Nexdigm, provides an outline of the three schemes: 

1) Production Linked Incentives (PLI)

The objective of this scheme is to attract global investment to scale electronics manufacturing through sales incentives.

Production LInkedin Incentives Scheme

2) Scheme for promotion of manufacturing of components and semiconductors (SPECS)

This scheme aims to strengthen the local manufacturing capability and ecosystem for semiconductors and electronic components.

Scheme for promotion of manufacturing of components and semiconductors

3) Electronics Manufacturing Clusters (EMC 2.0)

The objective of this scheme is to improve the base infrastructure for the electronics sector in India and raise the market value of local production.

Electronics Manufacturing Clusters

According to research, these schemes will aid in creating a robust manufacturing ecosystem that will be an asset to the global economy. It will also develop a durable ecosystem across the Indian electronics value chain, thereby integrating it with global value chains. Large-scale investments, electronics production worth nearly INR 11 trillion ($146.6 billion), and over ten million jobs are expected to be generated via the newly introduced schemes over the next five years. 

State-level Incentives

Along with the various central incentives, states like Maharashtra, Haryana, Karnataka, Andhra Pradesh, among others, consider electronics as a thrust sector in their individual Industrial State Policies. Fiscal incentives, including stamp duty exemption, interest subsidy, and infrastructural incentives (in the form of integrated townships and parks), have also been laid out by several states. 

A brief overview of the fiscal incentives available within states: 

State-level Incentives

Additionally, for Micro, Small, and Medium Enterprises (MSMEs), incentives in the form of water audits, testing, technology acquisition, and patent assistance are also available, which vary from state-to-state. Various states have policies for mega projects in IT parks and software parks, with assistance for land procurement, logistics support, and plug-and-play facilities.

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