Opinion Incentivising electronic manufacturing could help deepen an ecosystem

In an attempt to incentivise large-scale private sector investments in the country, the Union government, in 2020, launched the production linked incentive (PLI) scheme. While the PLI scheme was launched for a number of sectors, one segment where significant traction has been visible is mobile phones. As per reports, India’s mobile phone exports exceeded Rs 25,000 crore in January, and are expected to cross Rs 1.8 lakh crore by the end of this fiscal year, an increase of 40 per cent from last year. A large part of this has been driven by Apple, which through its contract manufacturers has built up a sizable base. In January, Apple reportedly accounted for 70 per cent of all mobile phone shipments. In fact, its three contract manufacturers — Foxconn, Tata Electronics and Pegatron — accounted for 75 per cent of all disbursements released by the government under the PLI scheme between 2022-23 to 2024-25. However, despite the success, some questions have been raised over the extent of value addition in the country. Inter-ministerial discussions in the government are also reported to have noted that value addition across sectors was low, even in segments where the PLI scheme was faring well.

In a bid to increase the domestic value addition — from 15-20 per cent in some sectors to around 30-40 per cent — the government is reported to have finalised the contours of a broader policy for electronic components’ manufacturing. The components which are the target of the scheme include display modules, sub assembly camera modules, printed circuit boards, among others. The overall outlay for the scheme, which is expected to span six years, has been pegged at around Rs 23,000 crore. The incentives, which will be paid annually, will be conditional on firms meeting investment, production and employment goals. The scheme could help facilitate the creation of a larger domestic electronics ecosystem, thereby helping deepen and broaden the manufacturing ecosystem in the country. An internal assessment carried out by the government had earlier estimated a “huge” demand-supply gap in the sector. Thus attempts to incentivise greater private investments, boost domestic value addition, are indeed welcome. There are also employment benefits to consider. The scheme aims to generate 91,600 jobs directly.

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