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By Nikit Popli and Neetu Singh
In a strategic move to accelerate India’s vision of becoming a global electronics manufacturing hub, the Union Cabinet has approved a Production-Linked Incentive (PLI) scheme worth ₹22,919 crore for the manufacturing of electronic components vide Notification F. No. W/49/2024-IPHW dated 08 April 2025. This game-changing initiative targets critical segments such as sub-assemblies, foundational electronic components, and a resilient supply chain covering components like Printed Circuit Board, SMD passives, Li-ion cells and parts such as capacitors, inductors, resistors, connectors, magnetics, and more, areas where India has traditionally been heavily import-dependent.
In addition to fostering the development of components and subassemblies, it also extends support to capital equipment & subassembly of equipment used in manufacturing, reinforcing an integrated system that enhances efficiency and production capabilities.
This scheme aligns with the government’s broader vision under Atmanirbhar Bharat to position India as a credible alternative to existing global supply chains, especially in light of ongoing global trade realignments. It complements earlier interventions by the Ministry of Electronics and Information Technology’s (MeitY) including the PLI for Large Scale Electronics Manufacturing (LSEM), the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), and Electronics Manufacturing Clusters (EMC) Scheme. While these programs successfully attracted global giants to set up large-scale assembly operations, the component ecosystem remained a missing piece, one that this new PLI specifically aims to fix.
What sets this new PLI scheme apart is its structured incentives, strategically designed to support Indian manufacturers. Incentives will be linked not just to turnover and capital expenditure, but also to design and quality benchmarks, with manufacturers expected to meet Six Sigma standards for quality excellence. This focus on design-led manufacturing and quality reflects the government’s aim to promote indigenous innovation, rather than merely becoming an assembly base.
This scheme aims to foster a competitive yet fair environment to industry players, by placing strong emphasis on the performance & robust compliance ensuring that incentives are allocated based on a first-come, first-served approach. To qualify, the applicant, along with its group companies and joint ventures must meet prescribed thresholds related to consolidated global ESDM revenue or manufacturing revenue for FY 2023-24.Importantly, there is an overall ceiling of 50% on incentives payable on eligible investment, ensuring that public resources are utilized judiciously.
A key highlight of the scheme is the mandatory target segment specific criteria for Display & Camera sub-assemblies wherein applicants commissioning complete sub-assembly process shall only be incentivized. Alongside this, localization criteria across different target segments would be a critical determinant for applicants to continue receiving incentives. These localization requirements are practical and progressive, taking into account the maturity cycle of each segment.For instance, in components like PCBs and Li-ion cell manufacturing, the localization trajectory allows time for technology absorption. This progressive localization strategy is expected to significantly strengthen domestic supply chains, reduce external dependencies, and promote a more resilient and self-sufficient electronics ecosystem over time.
The decision to allow joint ventures (JVs) with foreign participation is a particularly a progressive feature of this scheme. Advanced electronics and semiconductor component manufacturing demand significant investments in technology and infrastructure. By encouraging foreign technology infusion through JVs, India aims to leapfrog in areas like substrate manufacturing, semiconductor packaging, and advanced PCB fabrication.Indian Companies, through these partnerships, will gain access to cutting-edge know-how and boosting domestic capacity and workforce skills.
Additionally, the government’s decision to allow applicants who were earlier approved under the SPECS but could not avail incentives due to budgetary constraints to now apply under the new ECMS reinforces policy continuity. It sends a strong signal of the government’s long-term commitment to building a robust industrial ecosystem, enhancing industry confidence.
India’s electronics manufacturing sector has made remarkable strides in recent years, but a significant portion of components are still imported predominantly from China. According, to a press release issued by Ministry of Electronics and Information Technology on 28 March 2025, the newly approved scheme, aimed at strengthening the electronics component ecosystem, is expected to attract investment inflows of over ₹59,000 crore and production potential of ₹4.56 lakh crore over six years.The initiative aims to correct the import imbalance by deepening domestic value addition and reducing supply chain vulnerabilities.
The announcement comes at a strategically opportune moment. Global supply chains are undergoing realignments due to tariff wars and rising geopolitical risks. Multinational corporations are actively looking to diversify their sourcing base. By focusing on foundational components, and setting rigorous quality and localization benchmarks, India has the opportunity to present itself not just as an assembly hub but as a full-spectrum electronics manufacturing destination.
Globally, countries like China, Taiwan, and South Korea dominate the component manufacturing space. As per Niti Aayog reports, India’s current market share remains marginal. However, the potential impact of this scheme is vast. According to a press release issued by the Ministry of Electronics and Information Technology on 28 March 2025, the new scheme is expected to generate around 91,600 direct jobs, but it will also lay the foundation for India to emerge as a credible electronics component supplier to the world.
More than just another incentive program, this PLI scheme represents India’s ambition to climb up the global manufacturing value chain, fostering design-led, quality-driven, resilient manufacturing capabilities. It sends a clear message to the world: India is ready to become not just the factory, but also the innovation engine for the global electronics powerhouse.
(Nikit Popli is Partner – Indirect Tax, KPMG in India and Neetu Singh is a Chartered Accountant)
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