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The Production Linked Incentive (PLI) scheme of India is a policy initiative that aims to boost domestic manufacturing and exports of electronic products. The scheme offers a financial incentive of 3% to 5% on incremental sales (over base year) of goods manufactured in India for a period of four years¹. The scheme covers various segments of the electronics sector, such as mobile phones, IT hardware, electronic components, and semiconductor and display manufacturing.

The PLI scheme can have a positive impact on the electronics sector in India by attracting large investments, creating employment opportunities, enhancing competitiveness, and reducing dependence on imports. The scheme can also foster innovation and research and development in the electronics industry, which is crucial for achieving self-reliance and global leadership.

One of the key segments of the electronics sector that can benefit from the PLI scheme is the semiconductor and display manufacturing. Semiconductors are the essential components of electronic devices, such as computers, smartphones, TVs, etc. They are also required by various industries, such as telecommunications, information technology, industrial machinery and automation, medical electronics, automobile, engineering, power and solar photovoltaic, defence and aerospace, etc². Semiconductors enable the development of advanced technologies, such as 5G, IoT, AI, etc., that are driving the digital transformation of the economy and society.

However, India currently lacks a robust semiconductor ecosystem and relies heavily on imports to meet its domestic demand. According to a report by Deloitte³, India imported semiconductors worth $21 billion in 2019, accounting for 12% of its total electronics imports. The report also estimated that India’s semiconductor demand would grow at a CAGR of 15.3% from 2019 to 2025, reaching $32.35 billion by 2025.

The PLI scheme can help address this gap by incentivizing the domestic production of semiconductors and displays in India. The scheme offers an incentive of 25% on capital expenditure for semiconductor and display fabrication units (fabs), as well as assembly, testing, marking and packaging (ATMP) units¹. The scheme can also facilitate the development of a supply chain ecosystem for semiconductors and displays in India, involving raw materials, equipment, design services, etc.

By promoting the domestic production of semiconductors and displays in India, the PLI scheme can contribute to the growth and competitiveness of the electronics sector in several ways. Some of these are:

• Reducing the import bill and improving the trade balance for electronics products
• Enhancing the quality and performance of electronic products made in India
• Enabling the development and adoption of cutting-edge technologies and applications in various sectors
• Creating a large pool of skilled and talented workforce for the electronics industry
• Strengthening the national security and strategic interests of India

In conclusion, the PLI scheme of India is a critical policy intervention that can boost the domestic manufacturing and exports of electronic products in India. The scheme can also foster the development of a semiconductor and display ecosystem in India, which can contribute to the growth and competitiveness of the electronics sector. The scheme can help India achieve its vision of becoming a $1 trillion digital economy by 2026⁴.

Source:
(1) Electronics and semiconductor manufacturing industry in India. https://en.wikipedia.org/wiki/Electronics_and_semiconductor_manufacturing_industry_in_India.
(2) Electronic Systems Sector in India – Electronic Devices Industry. https://www.investindia.gov.in/sector/electronic-systems.
(3) GDP contribution of domestic electronics component manufacturing to …. https://www.zeebiz.com/india/news-gdp-contribution-of-domestic-electronics-component-manufacturing-to-double-soon-166914.
(4) How semiconductor plays as a crucial element for economy – Deloitte US. https://www2.deloitte.com/th/en/pages/about-deloitte/articles/semiconductor-eng.html.
(5) Electronics Manufacturing: GDP contribution of domestic electronics …. https://telecom.economictimes.indiatimes.com/news/gdp-contribution-of-domestic-electronics-component-manufacturing-to-double-soon/86776299.
(6) Production Linked Incentive Scheme (PLI) for Large Scale Electronics …. https://www.meity.gov.in/esdm/pli.
(7) Incentive Schemes for Electronics Manufacturing | Invest India. https://www.investindia.gov.in/schemes-for-electronics-manufacturing.
(8) Design and manufacturing of electronics system – Press Information Bureau. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1907276.
(9) Export of Electronic Goods – Press Information Bureau. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1814031.