In this article, we will take a look at some of the recent schemes launched by the government Incentive Scheme For Electronics Businesses.
India is the world’s largest smartphone market and the world’s second-largest internet subscription base. Besides these, India has always had a very high demand for electronics in general. The government Incentive Scheme For Electronics Businesses is won with promises of television sets and laptop computers. So there is no doubt that electronics is one of the largest sectors in terms of consumption in India. However, a lot of these electronics are manufactured outside of India and then imported here for sale. The foundation of a strong economy lies in its capacity to meet local demand through indigenous production and the ability to export goods to other nations.
To boost India’s position as an electronics manufacturing hub, the government of India has recently notified three different schemes for the manufacturers in the Electronics Industry. With an outlay of more than 48,000 crores, these schemes are likely to channel investment in electronics and boost manufacturing potential in India. This article discusses the objectives and scope of these new schemes while highlighting how an electronics business can benefit from them.
Electronics Industry In India – Overview
Electronics, as a segment, is immensely useful for a variety of downstream businesses, small and large industries, and consumers.
In India, the electronics segment contributes roughly 2.5% of the GDP, making it a significant area of focus for the government. It also employs roughly 13 million people.
According to government data at the Invest India portal, the Consumer Electronics and appliances industry in India is slated to become the fifth largest, globally by the year 2025
The Production Linked Incentive Scheme
India is now the second-largest mobile phone-producing country in the world. This scheme is aimed at large-scale investment in electronics manufacturing for electronic components and semiconductor packaging. It covers mobile phones and specified electronic components.
Details Of The Scheme
The following are some of the salient features of the scheme
- An incentive for 4 to 6% on incremental sales (over the base year of 2019-20) of goods manufactured in India to eligible companies for a period of five years.
- The scheme would provide for R&D costs, expenditure on testing, design tools, license and technology agreements, patents, copyrights, etc.
- The scheme covers Assembling, Testing, Marking, and Packaging units as eligible for benefits.
- The government anticipates that the demand for mobile phones is likely rise by almost 40% in the next five years. Hence, the scheme is focused on encouraging companies to set up manufacturing of mobile phones in India.
- The company availing benefits must be registered in India and should be engaged in the manufacturing of goods in India as covered under Target Segments. These targets are –
- Global manufacturing revenue (including group companies) to be more than ₹10,000 crores in the base year 2019-20
- For domestic companies, the criteria must be consolidated revenue of more than ₹100 crores from mobile manufacturing
- For other electronic components, the criteria is a revenue of more than ₹50 crores.
The Electronics Manufacturing Clusters (EMC 2.0) Scheme
To create world-class infrastructure in electronic manufacturing, the government is providing aid for setting up manufacturing clusters. This would include not just new clusters but up gradation of technological setup in existing clusters
- The Grants in Aid provided by the government would cover part of the project costs towards creating infrastructure, amenities, and common facilities under the project.
- The financial aid would be up to 50-75% of project costs, subject to a maximum overall limit of 75 crores. The scheme also envisages financing options available for the remaining project costs.
- The Scheme for the Promotion of the Manufacturing of Electronic Components and Semiconductors
- This scheme with a budget outlay of ₹3285 crores is a comprehensive scheme that covers many kinds of electronics sub-industries. This includes – consumer and industrial appliances, automotive electronics, automobile technologies, computer hardware, power and telecom equipment, etc.
- Additionally, under this scheme, an investment benefit of 25% on capital expenditure that incurs on the setting up of plant, machinery, equipment, utilities, and technology will be available.
The scheme would also cover expenses incurred on R&D for the manufacturing of electronic components, semiconductors, specialized sub-assemblies, and capital goods for these items, in the specified categories. This would help subsidize costs for domestic electronics manufacturing and add to the financial viability of all players in the industry.
FDI In Electronics Industry In India
The government has allowed 100% FDI in Electronics in India. This means a foreign investor can freely invest in companies engaged in the manufacturing of electronics in India. It can be without the need for elaborate approvals and compliances. Additionally, for FDI in defense-related electronics, investment up to 49% can be allowed under the automatic route, and above 49% through approval from the government.
Conclusion
With the growth in digital technologies, artificial intelligence, the development of mobile networks, and 5G technologies, the electronics industry presents a host of opportunities. Moreover, India’s production grew from USD 29 billion in 2014 to USD 70 billion in 2019. Further, the National Investment Promotion and Facilitation Agency predicts a growth rate of 26% annual sector growth and an 8% growth in the hardware market. Initiatives of the government such as the “Digital India”, the “Smart Cities” project, couples with “Make in India” and now “Atmanirbhar Bharat” creates a large scope for intensifying electronics manufacturing in India. If you have any other queries regarding any other government scheme or require assistance with any legal or regulatory matter, feel free to get in touch with us and we will ensure that our team of experts will assist you in the best possible manner.
