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    Production Linked Incentives Schemes in India
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India and a Resilient Supply Chain: The ESDM Perspective

In the last 5 years, production of electronic goods in India has doubled from $ 30 Bn to $ 75 Bn. With ample policy support and EoDB measures, the production of electronic components has also risen by 15% in the last 5 years, indicating India’s growing prowess in the sector.

Growth in the number of sub-assembly and component suppliers looking to expand in India's has been aided by multiple factors explained below: 

  • The rising labour cost in competing economies and evolving geo-politics has positioned India as an attractive manufacturing destination. 
  • A policy-led growth approach has been adopted by the Government of India through schemes like Production Linked Incentive (PLI) Scheme for Large Scale Manufacturing, PLI Scheme for IT Hardware, and Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), which aim to incentivise manufacturing at every step of the value chain. 
  • Initiatives such as ‘Supply Chain Resilience Initiative’ (SCRI) has accelerated the growth of domestic electronics production. The SCRI aims to create a virtuous cycle of enhancing supply chain resilience with a view to eventually attaining strong, sustainable, balanced and inclusive growth in the Indo-Pacific region. 
  • Electronic Manufacturing Clusters (EMC 2.0), a recently launched scheme has been crucial in creating economies of scale and self-propelling electronics hubs across the country. This can already be observed in Uttar Pradesh where smartphone manufacturers have created a network of close-knit sub-assembly suppliers.

A classic example of deepening of domestic supply chain can be observed through the growth of battery manufacturing in India. Many of the global giants in the sector like TDK, Samsung, Sunwoda, Everup, Maxell have already established their presence in India, either through a sales office or a manufacturing and research unit.

The extensive network of battery manufacturers in India can be leveraged in the manufacturing of multiple electronic products ranging from IT Hardware, IoT Devices, Smart Phones to audio products. This will bring in mature technology and pave way for cell manufacturing, which at present is absent in the country.

With 100 % FDI being allowed in the EV sector under the automatic route, the EV Market is estimated to reach a value of $ 2 Bn. According to Indian Energy Storage Alliance (IESA), the Indian EV battery market is projected to grow at a CAGR of 30% till 2026. This will result in greater opportunities for battery manufacturers, both in terms of volumes and technology enhancement.

As the model gets replicated across more sub-assemblies and components, our import dependence in electronics will reduce substantially. The Government is also encouraging global component manufacturers, with a special focus on PCBs and passive components through Round 2 of the PLI Scheme for Large Scale Manufacturing. With the recently launched Scheme for Semiconductors worth $ 10 Bn, the Government is also making sustained efforts to foster domestic capabilities for designing and manufacturing semiconductor chips and displays. 

Creating the ecosystem for low-margin and high-volume production in India will ensure that India not just manufactures the final product but emerges as a market-leader in component manufacturing as well. 

The newly launched PM Gati Shakti Plan and National Infrastructure Pipeline will further help in reducing the logistics cost from the current 14% of GDP to the global standard of 7 - 8%. With the right intent and collaborative efforts of government and industry, India is on its way to create a sustainable, self-sufficient supply chain in electronics.

 

This blog has been authored by Shivangi Sinha and Yuvraj Singh