Introduction
India’s electronics manufacturing sector is on track to achieve significant growth in FY25, with projections indicating a jump to $135-140 billion, up from $115 billion in FY24. While exports play a pivotal role in this expansion, sluggish domestic demand poses a challenge to sustaining overall momentum in the industry.
In recent years, India’s electronics sector has emerged as one of the country’s most promising industries, driven by a combination of factors including robust export demand, government initiatives, and the burgeoning mobile manufacturing ecosystem.
As the global demand for electronic goods continues to rise, India has found itself well-positioned to capitalize on this trend, particularly in mobile exports.
However, despite export-led growth, domestic demand remains stagnant, making it a critical challenge for industry players to maintain sustainable growth in the long term.
Key Overview of India’s Electronics Manufacturing Growth
- Projections for FY25: India’s electronics manufacturing sector is expected to grow by 15% in FY25, reaching between $135 billion to $140 billion, up from $115 billion in FY24.
- Export Performance: Electronics exports from India surged to ₹2.20 lakh crore from April to December 2024, with year-on-year growth projected at 45%, setting the stage for exports to reach ₹3.25 lakh crore in FY25.
- Mobile Exports Lead the Growth: Mobile phone exports have been a driving force in the sector, totaling ₹1.25 lakh crore from April to December 2024, and expected to rise to ₹1.75 lakh crore in FY25.
- Domestic Demand Challenges: Despite export success, domestic demand in the electronics sector has remained stagnant, limiting the industry’s ability to maintain sustained growth.
- Future Goals and Ambitions: The Indian government aims to achieve $500 billion in electronics manufacturing by FY30, but the current growth rate of 15% for FY25 falls short of the required 27.7% CAGR to meet this target.
Export Surge Drives Sector Growth
India’s electronics manufacturing sector has become increasingly export-driven, with the government’s push to boost ‘Make in India’ initiatives and favorable policies attracting significant foreign investment.
Exports from April to December 2024 alone totaled ₹2.20 lakh crore, marking a sharp year-on-year growth of 45%.
As the fiscal year advances, export figures will likely climb higher, with industry experts forecasting exports to hit ₹3.25 lakh crore in FY25, rising from ₹2.23 lakh crore in FY24.
Several factors drive this strong performance, including increasing global demand for Indian-made electronic goods, competitive manufacturing costs, and a robust supply chain.
Mobile Export Sector: A Key Growth Engine
A major contributor to India’s electronics export surge is the mobile phone manufacturing sector. Mobile phone exports from India have seen remarkable growth, totaling ₹1.25 lakh crore from April to December 2024 alone. This is expected to grow by 35%, reaching ₹1.75 lakh crore in FY25.
The mobile sector has become a standout performer in India’s electronics manufacturing landscape, benefiting from robust demand in international markets such as the Middle East, Europe, and Southeast Asia.
India’s mobile manufacturing ecosystem has witnessed substantial investments in recent years, particularly from global tech giants like Apple, Samsung, and Xiaomi.
These companies have ramped up their production capacity in India, encouraged by favorable government policies such as the Production-Linked Incentive (PLI) scheme.
This scheme offers incentives for companies to increase production in India, further cementing the country’s role as a major player in the global mobile phone manufacturing market.
The Slowdown in Domestic Demand
Despite impressive export growth, India’s electronics manufacturing industry faces a critical challenge in the form of stagnant domestic demand. While exports are soaring, domestic consumption has failed to provide the same level of support. This flat demand in India is largely driven by a combination of factors, including economic uncertainty, rising inflation, and a cautious consumer outlook.
The domestic electronics market has seen slow growth in key segments, including consumer electronics, home appliances, and computing devices. One of the primary reasons for this slow demand is the increasing shift towards affordable and refurbished electronics, which limits the growth potential for newer and premium product lines.
While the Indian government has made strides to promote electronics consumption through initiatives like the National Electronics Policy, more needs to be done to invigorate domestic demand.
The expansion of consumer financing options, improved awareness of homegrown products, and investments in infrastructure could help reverse this stagnation in the long term.
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India’s $500 Billion Target by 2030
The Indian government has set an ambitious goal for the electronics manufacturing sector: achieving $500 billion in output by FY30.
To reach this target, the sector must maintain a Compound Annual Growth Rate (CAGR) of 27.7%. However, with the current growth projections for FY25 pegged at 15%, the gap to meeting the target is substantial.
Experts suggest that the government needs to implement more aggressive policies to incentivize both domestic consumption and export growth.
Key to achieving the $500 billion target will be expanding the range of products manufactured in India, moving beyond mobile phones to include other consumer electronics, components, and more advanced technological products.
The country will also need to invest heavily in research and development, enhance its infrastructure, and ensure a steady supply of skilled labor to meet the growing global demand for electronics.
Challenges Ahead: Sustaining Long-Term Growth
While the outlook for India’s electronics manufacturing sector remains positive in the short term, several challenges could impede sustained growth. One of the primary concerns is the over-reliance on exports.
Although exports have been a major growth driver, the global electronics market is highly competitive, with countries like China, Vietnam, and South Korea vying for a larger share of the pie.
India must therefore ensure that it remains competitive by improving its manufacturing processes and lowering costs.
Additionally, the lack of domestic demand for electronics remains a significant issue. The government can address these challenges by promoting domestic consumption through fiscal incentives. However, boosting consumer confidence and increasing purchasing power requires additional efforts.
The sector also faces obstacles in terms of supply chain disruptions, which have affected global electronics manufacturing over the past few years. India will need to work towards strengthening its local supply chains and minimizing its dependency on imports of critical components, particularly semiconductors, to secure long-term growth.
Conclusion: Optimism Amidst Challenges
India’s electronics manufacturing sector is well-positioned for growth, driven largely by exports, particularly in the mobile sector. However, for the country to achieve its ambitious target of $500 billion in electronics manufacturing by FY30, it will need to address domestic demand stagnation, improve competitiveness, and foster innovation. If these challenges are met, India could become a global electronics manufacturing powerhouse in the years ahead.
As the world moves towards more digitized and tech-savvy economies, India’s role in the global electronics supply chain will continue to evolve. The next few years will be crucial for determining whether the country can overcome its challenges and maintain the momentum needed to reach its long-term manufacturing goals.
