Further boosting the electronics manufacturing industry is the provision of presumptive taxation regime for non-residents who provide services to a resident company that is establishing or operating an electronics manufacturing facility.
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During her Union Budget 2025 speech, Finance Minister Nirmala Sitharaman said the government will set up a National Manufacturing Mission, “covering small, medium and large industries for furthering ‘Make in India’ by providing policy support, execution roadmaps, governance and monitoring framework for central ministries and states”.
This mission’s mandate will include five focus areas: Ease and cost of doing business; future ready workforce for in-demand jobs; a vibrant and dynamic MSME sector; availability of technology; and quality products. Currently, there are over a crore registered MSMEs, employing 7.5 crore people, and generating 36 percent of the country’s manufacturing and close to 45 percent of the exports.
One of the most significant impacts of this mission will be its ability to reduce India’s reliance on imports, particularly in critical areas like EV batteries and semiconductor manufacturing. “Currently, India faces challenges such as high logistics costs and import dependency that hinder its competitiveness on the global stage. The National Manufacturing Mission addresses these issues by promoting local production and encouraging investments in advanced manufacturing technologies,” says Yogesh Pandit, Director (Product Acceleration), FSID. The expanded Production-Linked Incentive (PLI) scheme with a substantial budget allocation of Rs 16,092 crore for FY25, is poised to drive growth in high-tech sectors, creating a robust supply chain that can withstand global disruptions.
Schemes to boost labour-intensive sectors
To further boost the country’s footwear and leather sector, Sitharaman announced that a product scheme will be implemented to support “design capacity, component manufacturing, and machinery required for production of non-leather quality footwear, besides the support for leather footwear and products”. This scheme is expected to facilitate employment for 22 lakh persons, generate a turnover of Rs4 lakh crore and exports of Rs1.1 lakh crore. The PLI scheme for leather and footwear manufacturers has a total outlay of Rs2,600 crore for FY25-32.
During the Budget 2025 speech, the finance minister said this will be building on the National Action Plan for Toys. “The scheme will focus on development of clusters, skills, and a manufacturing ecosystem that will create high-quality, unique, innovative and sustainable toys that will represent the ‘Made in India’ brand,” she explained. The scheme is yet to be approved by the cabinet. “This policy could significantly enhance our ability to develop and offer toys that are not only engaging but also embody the values we cherish, making a lasting impact on the global stage,” says Sukriti Mendiratta, founder, Panda’s Box.
In 2023, the government, announced an outlay of Rs 3489 crore for a PLI scheme for Indian toy manufacturers, for finished toys. However, there has been no notification for the implementation of the same. “We feel the toy manufacturing can be a force multiple for employment, with every $10 million made in revenue by the sector has the potential of generating 1000 new jobs,” says Aravind Melligeri, Chairman & CEO, Aequs. He adds, “Given the current market conditions and also long-term need to make India a global toy manufacturing hub, the emphasis on clusters for toy manufacturing is welcome. Having said that, we are awaiting some PLI announcements in the near future for components for consumer electronics, and manufacturing of toys which will provide a further fillip to Make in India.
Also read: Will the Rs3,500 crore PLI scheme for toy manufacturers make India a global hub for playthings?
Even for the drone technology sector, there has been a rise in the PLI scheme spending for drones and drone components from Rs33 crore to Rs57 crore, within the total outlay of Rs120 crore. “This reflects the increasing scale of industry participation and adoption. This trend highlights the sector’s growing momentum and the need for sustained support. However, to fully unlock the potential of this technology, a significantly larger scheme of Rs1,000-2,000 crore over at least five years is essential,” says Ankit Mehta, CEO, ideaForge. The Rs20,000 crore allocation for private sector-led R&D and the launch of the National Geospatial Mission will accelerate advancements in autonomous systems, precision mapping, and next-generation infrastructure planning, explains Mehta.
As part of the industry’s pre-Budget expectations, experts suggested that it is critical to boost global supply chains. Sitharaman addressed this stating that, “Support will be provided to develop domestic manufacturing capacities for our economy’s integration with global supply chains. Sectors will be identified based on objective criteria.” However, she didn’t dwell much what the criteria will be or other details. There is also a push for promoting Global Capability Centres in Tier II cities. A national framework will be formed for the same, enhancing the availability of talent and infrastructure.
Addressing the skilling challenge
Skilling has been a major challenge for the manufacturing industry. Building on the initiative announced in the July 2024 Budget, the government has announced that five National Centres of Excellence for skilling will be set up with global expertise and partnerships to equip our youth with the skills required for ‘Make for India, Make for the World’ manufacturing. “To bridge the widening divide between academia and industry, the establishment of five Centres of Excellence is not just a necessity, but a cornerstone for aligning education with the evolving demands of the job market,” says Tarun Baijnath, partner, Grant Thornton Bharat. The partnerships will cover curriculum design, training of trainers, a skills certification framework, and periodic reviews. “Global skilling partnerships will enable upgrading manufacturing. Infrastructure will be expanded in IITs set up after 2015, allowing for 6,500 more students across five IITs,” says Padmanand V, partner and agriculture industry leader, Grant Thornton Bharat.
Further boosting the electronics manufacturing industry is the provision of presumptive taxation regime for non-residents who provide services to a resident company that is establishing or operating an electronics manufacturing facility. In the recent past, we have been seeing that the government has been approving neighbouring countries to invest in India. “By encouraging partnerships and JVs with neighbouring countries, India can leverage their technical expertise while maintaining control over critical sectors,” says Kathir Thandavarayan, partner, consulting, Deloitte India. Given the existing skill gap in the industry, the knowledge and expertise of foreign workforce can further help boost domestic manufacturing.
Also read: How India-China partnerships are reshaping component manufacturing
Indirect taxes to support to Domestic Manufacturing
For electronics goods, Sitharaman has rectified the inverted duty structure to increase the BCD on interactive flat panel display (IFPD) from 10 percent to 20 percent and reduce the BCD to 5 percent on open cell and other components. “The rationalisation of tariffs on key inputs and components creates a more competitive cost structure and encourages deeper integration with global value chains,” says Pankaj Mohindroo, chairman, ICEA.
This year, the finance minister has exempted BCD on cobalt power and waste, the scrap of lithium-ion battery, lead, zinc and 12 more critical minerals in addition to the earlier exempted 25 critical minerals that are not domestically available. On textiles, to promote domestic production of technical textile products such as agro-textiles, medical textiles and geo textiles at competitive prices, she said, “I propose to add two more types of shuttle-less looms to the list of fully exempted textile machinery.”
