India's electronics sector, heavily reliant on imported components, faces mounting challenges due to high import tariffs and restrictions on Chinese investments, according to industry voices calling for policy revisions.
The Confederation of Indian Industry (CII) has raised concerns that stringent import duties, ranging from zero to 27.5% on various tariff lines, are burdening manufacturing costs and eroding the global competitiveness of Indian electronics products.
This situation, the CII argues, is exacerbated by limitations on foreign direct investment (FDI) from countries sharing land borders with India, including China, imposed by Press Note 3 in 2020 to prevent predatory acquisitions during the pandemic.
Industry leaders warn that these measures, intended as safeguards, are now impeding the growth of India's electronics sector. They assert that the Production Linked Incentive (PLI) scheme, introduced in 2020 to encourage large-scale manufacturing by offsetting cost disadvantages, may no longer suffice due to the "tariff-induced cost" affecting competitiveness against countries like China and Vietnam.
"The PLI scheme's fiscal support of 4%-6% is grossly inadequate to level the playing field compared to our regional competitors," remarked industry stakeholders. They emphasize that while PLI initially aimed to localize production, the continued high import tariffs have made it challenging to achieve self-sufficiency in critical electronic components.
In its report titled "Developing India as the Manufacturing Hub for Electronics Components and Sub-Assemblies," the CII outlines strategic actions needed to transition from assembly-based manufacturing to value-added production at the component level. Key recommendations include revisiting FDI restrictions with adequate safeguards, reducing import duties on electronics components, and facilitating technology transfers to bolster the domestic ecosystem.
"India must adopt a non-restrictive stance towards FDI, ease the movement of skilled manpower, and address non-trade barriers to attract investments," the CII report said.
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