8. Value-Addition in Electronics: NITI Aayog\'s Strategic Roadmap

The NITI Aayog’s sixth edition of the Trade Watch Quarterly (Q2 FY26), released in February 2026, highlights the meteoric rise of India\'s electronics sector. While it has ascended to become the second-largest export segment after petroleum, the report cautions against \'assembly-led\' complacency. To sustain a $500 billion manufacturing ambition by FY30, India must transition from being a final-assembly hub to a high-value component manufacturer. Key Summary Points for UPSC • Exponential Export Growth: India’s electronics exports surged from $8.6 billion in 2015 to $42.1 billion in 2024, exhibiting a CAGR of 17.2%. This growth significantly outpaced the global average of 4.4%, positioning electronics as 10% of India\'s total export basket. • Concentration Risk: Current success is heavily skewed toward mobile phones and telecom equipment, which constitute over 52% of electronics exports. This reflects a \'final-assembly\' model rather than a deep-rooted manufacturing ecosystem. • The \'Value Gap\' in Components: While India holds a 3.5% global share in mobile phone demand, its share in the high-value Integrated Circuits (IC) and Semiconductor segment—which accounts for 26.2% of global demand—is a marginal 0.02%. • Structural Cost Disadvantages: Indian manufacturers face a 10%-18% cost disability compared to competitors in China and Vietnam. These are driven by high logistics costs, inverted duty structures, and a 9%-13% higher cost of capital. • The E-commerce Catalyst: E-commerce is projected to contribute 20%-30% of merchandise exports by 2030. Electronics already accounts for nearly half of India\'s online retail, suggesting a massive digital export potential for MSMEs. • Shift to Global Value Chains (GVCs): NITI Aayog advocates for a \'Component-led\' strategy, moving into PCB design, semiconductor ATMP (Assembly, Testing, Marking, and Packaging), and power electronics to embed Indian firms into intra-Asian processing trade. Constitutional and Legal Provisions • Article 246 (Seventh Schedule): \'Industries\' and \'Trade and Commerce\' fall under the Union and Concurrent Lists, allowing the Centre to formulate schemes like PLI and SPECS. • Foreign Trade (Development and Regulation) Act, 1992: The primary legal framework for regulating and enhancing exports, under which the Directorate General of Foreign Trade (DGFT) operates. • Customs Act, 1962: Crucial for addressing the \'Inverted Duty Structure\'—where raw materials are taxed higher than finished goods—a major hurdle identified in the report.• Press Note 3 (2020): A policy amendment regulating FDI from countries sharing a land border with India. NITI Aayog suggests fast-tracking these for specific \'ecosystem-critical\' companies. Important Definitions • Inverted Duty Structure: A tax situation where import duties on input/raw materials are higher than those on finished products, discouraging domestic value addition. • Compound Annual Growth Rate (CAGR): The mean annual growth rate of an investment over a specified period of time longer than one year. • Integrated Circuit (IC): A small semiconductor wafer (chip) on which thousands or millions of tiny resistors, capacitors, and transistors are fabricated. • Global Value Chain (GVC): The full range of activities (design, production, marketing, distribution) that businesses and workers do to bring a product from its conception to its end use and beyond. UPSC Relevance • GS Paper III: Indian Economy and issues relating to planning, mobilization of resources, growth, development, and employment. Changes in industrial policy and their effects on industrial growth. • GS Paper II: Government policies and interventions for development in various sectors and issues arising out of their design and implementation. • Current Affairs: Understanding the transition from \'Assemble in India\' to \'Make in India\' and the strategic importance of semiconductors for technological sovereignty. Conclusion India’s electronics journey is at a crossroads. Having achieved scale in assembly, the challenge is now one of depth. Bridging the $58.5 billion trade gap in this sector requires not just fiscal incentives like the ₹40,000 crore Electronics Components Manufacturing Scheme, but also structural reforms in logistics and predictable procurement. For India to be more than a \'consumption market\' for global giants, it must anchor itself as a provider of the \'brains\' (chips and components) of modern gadgets.