Need Changes in Labor Laws, Customs Duties to Boost Electronics Manufacturing: Vaishnaw

The newly announced electronic component manufacturing scheme will introduce a new sector in the country, necessitating amendments to existing labor, customs, and tax laws, said Ashwini Vaishnaw, Minister of Electronics & Information Technology on March 28. 

“The electronics manufacturing industry stands apart from other sectors in two key ways. First, its work environment is significantly different—clean, highly organized, and comfortable—unlike the conventional image of a factory that many might have in mind. Secondly, this industry employs people on a massive scale. This calls for a more tailored, flexible approach to labor regulations,” said the IT Minister. 

He also highlighted the importance of customs duties for this new sector, and said, “Having too many different duty rates increases the risk of misclassification, leading to disputes. That’s why we urged the Finance Ministry to rationalize the customs structure. We appreciate their efforts in reducing the number of duty rates, as fewer rates minimize misclassification risks and simplify compliance.”

He also informed that with regard to amendments in these reforms, he is in talk with the concerned ministries. 

Vaishnaw mentioned that it is the time when we need to come out of the mindset of import-substitution and start producing for our country and for the rest of the world. 

The IT Minister also highlighted that this is the first time that any government has made a separate scheme for the manufacturing of passive electronic components. 

When asked about the government's plans to establish a research and development body in collaboration with academia and industry for the electronic component manufacturing sector, the Minister told Outlook Business that Indian companies are now developing their own design and analysis capabilities—something that was nearly nonexistent just a few years ago. "I won’t name them, but one company recently shared that they have built a team of 50 design engineers, while another has expanded to 200 engineers," he noted.

“This second company is designing a complete server in-house and is now entering a development phase where they are competing with the global best in certain components and devices,” he added. 

The Union Cabinet chaired by the Prime Minister Narendra Modi on Friday approved the Electronics Component Manufacturing Scheme with an outlay of Rs.22,919 crore to make India Atmanirbhar in the electronics supply chain.

This scheme aims to develop a robust component ecosystem by attracting large investments (global/domestic) in electronics component manufacturing ecosystem, increasing Domestic Value Addition (DVA) by developing capacity and capabilities, and integrating Indian companies with Global Value Chains (GVCs).

India has already made significant progress in mobile and electronics manufacturing and become the world’s 2nd largest mobile manufacturing country. 

In 2014, India had only 2 mobile manufacturing units but fast forward to today, the nation boasts over 300 manufacturing units, underscoring a significant expansion in this vital sector.

Right now, only 15-20% of the parts used in electronics (like smartphones) are made in India, while the rest are imported. The goal is to increase this to 30-40%, meaning more parts will be manufactured domestically instead of relying on foreign suppliers.