To raise its share in the $4.6-trillion global electronics market from about 1% now, India should reorient incentive frameworks to explicitly reward production of critical components, sustained R&D investment, and end-to-end supply-chain integration, Niti Aayog said in a report.

It said the country should move beyond demand-led assembly growth toward a deeply integrated, cost-competitive manufacturing ecosystem.

While domestic consumption, production-linked incentives, and assembly expansion have powered rapid output gains, export performance still lags due to structural cost gaps, limited component manufacturing, and fragmented supply chains.

Closing these gaps requires a coordinated, long-term strategy spanning industrial policy, fiscal support, trade integration, and skills, it said.

“Rationalise input tariffs, correct inverted duty structures, and address logistics inefficiencies to narrow the 10–18% cost gap vis-à-vis global competitors,” it said in the latest edition of Trade watch report.

To lower input costs for strategic components, it is suggested to introduce VAT/GST refunds or rebates on imported raw materials to support battery and critical component manufacturing and incentivise domestic capacity creation.

“Integrate capex subsidies, tax incentives, and R&D support with labour and utility cost measures to enhance overall manufacturing competitiveness,” it said.

Developing advanced electronics clusters with shared testing, certification, and reliability labs would reduce compliance costs, shorten product cycles, and help firms meet global standards. Parallel investments in high-technology skills—chip design, embedded software, system integration, and advanced testing—are essential to support the government’s $500-billion manufacturing target and enable firms to compete globally.

In the Budget for 2026-27, the government announced exemptions on basic customs duty (BCD) for certain inputs used in the manufacture of microwave ovens and in the Budget 2024-25, it reduced BCD on mobile phones, mobile PCBA and chargers to 15% to support domestic production and consumer affordability, while proposing exemptions on certain inputs to promote local component manufacturing.

Currently, India’s shipments are heavily concentrated in mobile phones and directed mainly to the United States, United Arab Emirates, and the Netherlands, while high-tech segments like semiconductors remain dominated by China, Hong Kong, and Taiwan. Expanding into chips, components, and advanced electronics—and leveraging South–South trade growth and cross-border e-commerce—would broaden India’s market reach and reduce reliance on a narrow export base, it added.