India is putting substantial public money behind electronics component manufacturing. The Electronics Components Manufacturing Scheme (ECMS), approved in 2025, was given a ₹40,000-crore outlay in the Union Budget 2026-27.
The scheme offers turnover-linked, capital expenditure and hybrid incentives for areas including display and camera modules, printed circuit boards, passive components, electro-mechanicals, lithium-ion cells and parts used in the component supply chain.
The policy push is aimed at a sector where India still has a relatively shallow domestic component base. Electronic components accounted for about 9 per cent of India's electronics production in 2023-24, while domestic value addition in mobile phones has remained at 18-20 per cent, according to data shared by India Cellular and Electronics Association.
That leaves a larger question beyond the immediate investment cycle: can Indian component manufacturers compete on their own once government support and tariff protection reduce?
Why Indian components cost more
Indian manufacturers start with several cost disadvantages.
Prof Mahendra Chouhan, president of IMC Chamber of Commerce and Industry, said India's manufacturing ecosystem faces relatively high energy and logistics costs, shortages of skilled labour and regulatory complexities. He cited NITI Aayog's assessment that industrial electricity tariffs in India are 10-60 per cent higher than those in peer economies, partly because of cross-subsidisation.
“The problem extends to imported inputs,” Chouhan said. “India remains dependent on imports for 90-95 per cent of its semiconductor and component requirements, with China, Taiwan, South Korea and Singapore among the key sources. This puts Indian manufacturers up against supply chains that have greater upstream integration.”
China's advantage is therefore not limited to the price of an individual component. It comes from the scale and depth of the manufacturing ecosystem around it.
According to a May 2026 analysis by KPMG India, import dependence, higher costs, fragmented supplier networks, limited Tier-2 and Tier-3 suppliers, and the absence of large integrated clusters constrain India's electronics competitiveness.
What subsidies can do?
The role of incentives is to help manufacturers overcome these disadvantages while the ecosystem is being built.
Chouhan said incentives should help Indian manufacturers overcome their initial scale and cost disadvantages and establish themselves in global supply chains, rather than become a permanent source of competitiveness.
He said government support should be time-bound and linked to measurable outcomes such as investment, production, localisation, employment and exports.
“The ECMS itself follows this approach. Its turnover-linked incentive runs for six years, including a one-year gestation period, while the capex incentive operates for five years,” Chouhan added.
For component manufacturing, however, the gestation period can be long.
Bharath Krishna Rao, CEO and co-founder of Emobi - an EV manufacturing company - said component manufacturing involves high upfront capital expenditure and that manufacturers need time to develop products, qualify them with customers and secure repeat orders. He put that process at anywhere from one year to five years or more.
“This is the reason subsidies can matter even before a factory reaches commercial scale. They reduce part of the initial risk while a manufacturer builds capacity and a customer base,” Rao said.
But this also creates the limit of subsidies. If the cost advantage continues to depend on government support after the manufacturer has reached scale, the underlying competitiveness has not been established, experts said.
Scale is the point of transition
Pranav Chopra, CTO and co-founder of AC manufacturer Optimist, said Indian component manufacturers are still carrying the early costs of building an ecosystem that Chinese manufacturers have already amortised over decades.
"In pre-scale, the government subsidies are important and necessary," Chopra said.
The transition, therefore, cannot be based simply on a fixed number of years.
Chopra said subsidies should phase out as the ecosystem reaches scale, which would allow competitiveness to shift towards manufacturing efficiency rather than government support.
This is also why the wider manufacturing ecosystem matters. A component manufacturer cannot reach efficient volumes if the companies that buy its products do not scale alongside it.
"Those components that are manufactured need to be purchased by manufacturers of appliances or equipment," Chopra said, adding that component and equipment manufacturers need to grow together.
“The implication is that subsidies directed at one factory or one part of the value chain may not be enough. Raw materials, component suppliers, assemblers and end-product manufacturers need to develop together,” he said.
What happens if tariffs also go?
Experts said tariffs provide another layer of protection. They can make imported components relatively more expensive and give domestic manufacturers room to build capacity.
But tariff protection can also work against competitiveness if domestic alternatives for inputs are unavailable.
Chouhan said Indian manufacturers ultimately need to compete on cost, quality, scale and reliability rather than tariff protection. He also warned that excessive protection can increase input costs where domestic alternatives do not exist.
“The experience of India's solar manufacturing sector illustrates the role tariffs can play,” Rao said.
NITI Aayog's latest assessment says basic customs duties, along with the Approved List of Models and Manufacturers and the PLI scheme, reduced the price advantage of imported solar equipment and supported the expansion of domestic manufacturing. At the same time, India continues to depend heavily on imports for upstream inputs such as polysilicon and wafers.
For an Indian component maker, experts said, removing both subsidy and tariff protection before the business has reached sufficient scale would therefore expose it directly to global prices.
A Chinese competitor with a deeper supplier base, larger production volumes and established upstream links could have a structural cost advantage.
But keeping tariffs and subsidies indefinitely does not solve that problem either. It can protect a domestic market without forcing the manufacturer to reach the cost and efficiency levels required in export markets, experts said.
Can India export without the tariff wall?
The three experts converge on one practical requirement: the eventual test has to be the market.
Chouhan said Indian manufacturers need to compete on “cost, quality, scale and reliability”. He called for lower energy and logistics costs, deeper domestic supplier ecosystems, greater availability of skilled labour and a more competitive import-duty structure.
Rao took a broader view, saying localisation and domestic supply chains are also a strategic requirement because dependence on overseas components can create risks for critical industries.
Chopra's argument is that once manufacturers reach scale, the basis of competition should change. He said Indian companies would also have a labour-cost advantage, but would need to improve manufacturing efficiency and innovation to remain competitive after government support ends.
India's electronics sector has already demonstrated that policy support can attract investment and expand manufacturing. Electronics production increased nearly six-fold between 2014-15 and 2024-25, while exports have also grown sharply. But the country's component ecosystem remains less developed than its assembly base.
That makes the next phase different from the first.
The answer lies beyond subsidies
India can use subsidies to build component manufacturing. The harder task is to make those manufacturers competitive after the incentives end.
Experts said this requires scale large enough to lower unit costs, domestic suppliers that reduce dependence on imported inputs, competitive power and logistics, skilled workers, access to technology and customers that can absorb growing domestic production.
The policy support also needs to cover the wider ecosystem rather than isolated manufacturers. Chopra said government support should extend from the end consumer and intermediate manufacturers to component makers and raw-material supply chains.
KPMG's assessment also calls for larger manufacturing clusters, stronger component ecosystems, greater R&D, better skills and deeper integration with global value chains.
So, can India make components competitively?
Yes, but subsidies alone cannot make that happen. They can help Indian manufacturers cross the high-cost, pre-scale stage. The real test will come when support begins to taper and companies have to compete through volume, efficiency, quality, technology and supply-chain depth.
Experts say the point at which subsidies become unnecessary is therefore less about the number of years support has been available and more about whether Indian component manufacturing has reached the scale and ecosystem depth needed to compete without it.
 "Can India make components competitive after subsidies and tariffs end?")
