India’s Union Budget 2026 has raised the outlay for its electronics component manufacturing scheme to ₹40,000 crore, signalling a renewed focus on supply chain depth rather than final assembly alone.
India’s budget electronics manufacturing ambitions have long faced a structural bottleneck: components.
While smartphone assembly and consumer electronics production have scaled rapidly over the past five years, the value captured domestically has remained limited due to heavy reliance on imported components. Budget 2026 attempts to address that imbalance by increasing the outlay for the electronics component manufacturing scheme to ₹40,000 crore.
The move signals a strategic shift from assembly-led growth to supply-chain-led industrialisation.
Why components matter more than final products
Components — including printed circuit boards, passive elements, camera modules, connectors, and power management systems — account for a majority of electronics value.
Without domestic component ecosystems:
- Assembly margins remain thin
- Trade deficits persist
- Supply chains remain vulnerable to shocks
By raising the scheme’s outlay, the government is betting that scale incentives can finally make component manufacturing viable in India.
Learning from the PLI experience
Production-linked incentives (PLIs) helped India emerge as a major smartphone assembler, attracting global players and boosting exports. But critics have noted that local value addition plateaued.
Budget 2026 appears to reflect that learning: incentives are now being redirected deeper into the value chain, where technological capability and capital intensity are higher.
This is also where spillover benefits — tooling, materials science, workforce upskilling — are strongest.
Global context: supply chains are fragmenting
Geopolitical tensions, trade restrictions, and supply disruptions have pushed companies to diversify manufacturing bases.
India’s expanded component scheme positions it as a complementary hub rather than a replacement for East Asia. The goal is resilience, not isolation.
Execution, however, will determine success. Component manufacturing demands:
- Stable power
- Advanced logistics
- Skilled technicians
- Long-term policy certainty
The ₹40,000 crore allocation buys time — not guaranteed outcomes.
