Examine the challenges in building a component-level manufacturing ecosystem in India as against final assembly of electronic goods.

Components accounted for about 42% of the value of global electronics production in 2022, but only 9% in India in 2023-24 [1]. India has mastered final assembly; the deeper challenge lies upstream, where the economics, tariffs and skills work against domestic manufacture.

Structural economics of components

• NITI Aayog (2024) found component making has a low turnover-to-investment ratio — heavy machinery spending against modest annual sales — with high upfront capital and long gestation [1].
• Assembly, by contrast, is working-capital light and yields quick turnover, which is why investment gravitated there.

Cost disability that incentives alone cannot close

• Manufacturing components in India costs 14%–18% more than in China: tariffs and materials 4%–5%, logistics 2%–3%, and costly finance up to 4% [1].
• Indian borrowing runs 5–6 percentage points above international rates, while interest subsidies keep China, Taiwan and Vietnam at 2%–7% [1]. A sales-linked incentive does not reduce monthly interest.

Inverted duty structure

• Machinery enters at zero customs duty, but critical parts and sub-parts attract 5%–25% [1] — taxing inputs more than outputs, making imported finished goods cheaper than domestic manufacture.

Ecosystem and institutional gaps

• Electronics Manufacturing Clusters lack shared infrastructure, unlike Vietnam's lab-equipped warehouses or Taiwan's 0% VAT, 17% corporate tax cap and assured power [1].
• Approvals remain fragmented across central, state and municipal portals; NITI Aayog (2026) urged strengthening the National Single Window System [1].
• Skill shortages persist at operator, technician and engineer levels [1].

The record of past schemes

• SPECS (closed March 2024) drew ₹9,482 crore against an expected ₹20,000 crore, employing 39,092 against a 6,00,000 expectation [1].
• Under ECMS, commitments reached ₹1.15 lakh crore, yet only ₹7 crore was spent in RE 2025-26 against a ₹40,000 crore outlay [1][2] — approvals are promises, not production.

Domestic value addition has risen to 18%–20% [3], and ECMS's capex-linked and hybrid incentives with a one-year gestation window correctly target the capital problem [4]. Sustained gains now require duty rationalisation, cluster infrastructure, single-window clearance and focused skilling — converting assembly leadership into genuine value-chain depth under Atmanirbhar Bharat.