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In preparation for India's upcoming Union Budget 2025, the electronics industry submitted a comprehensive set of demands for boosting India's position in the global electronics sector. The industry needs better incentives for research and development while also requiring specific support programs for small and medium-sized businesses and expanded collaboration through the Design Linked Incentive program. India needs these measures to speed up its transformation into a leading world center for electronics manufacturing and innovation.
The electronics industry faces important challenges related to its insufficient research and development investments across India. Recent R&D spending growth in India falls short when compared to the investment made by major economies China and the United States. FDI R&D in India currently stands at 0.6-0.7% of GDP while China invests 2.4% and the US and Israel allocate 3.5% and 5.4% respectively. Industry leaders agree that increased R&D incentives should enhance innovation capabilities which can position India as a global leading market contender.
Organizations in the electronics sector want authorities to reduce taxes on corporate incomes to 5% for businesses that apply research expenses exceeding 3% of their annual revenue and secure patents and design registration frameworks in Indian territories. The proposed regulatory framework creates new opportunities for private sector R&D investments focused on semiconductor technology and AI applications. Reduced tax rates targeting patent-protected intellectual property (IP) income form the basis of a proposed "patent box" tax framework.
The electronics sector faces major difficulties impacting micro, small and medium-sized enterprises (MSMEs). The high costs of testing together with certification act as barriers for MSMEs to achieve international standards necessary for global market entry. The industry asks the government to create subsidized testing and certification facilities alongside financial incentives that will lower expenses for MSMEs.
The implemented programs will enable domestic businesses to enhance their international market competencies, particularly in demanding high-value product markets where quality standards apply. Export competitiveness emerges as a major priority that needs attention. Indian manufacturers stand to take more share from global markets because numerous worldwide companies have selected the China+1 strategy for their supply chain diversification.
Domestic electronics firms need RoDTEP scheme export incentives according to industry leaders who want to exploit new market opportunities. The electronics manufacturing industry demands that the government provide a 4-5% export incentive to boost India's global competitiveness in product exports.
Through its funding program the Design Linked Incentive (DLI) Scheme promotes semiconductor and electronics design innovation in India. Stakeholders believe that present funding levels and time limits from the scheme do not sufficiently address the future needs of this industry.
DLI Scheme began in 2022 by offering organizations reimbursement of half their qualifying expenditures spent on electronic and semiconductor design activities. Industry organizations request extending the DLI Scheme until 2035 because of electronics design duration lengths and asking for substantial funding augmentation.
The Indian semiconductor industry needs specialized support beyond the existing DLI Scheme to fulfill its growth potential. Semiconductor manufacturers who invest in building new fabrication facilities should receive lowered taxation benefits as per expert advice from industry professionals. The capital-intensive nature of semiconductor production would benefit from incentives allowing manufacturers to depreciate their production equipment at an accelerated pace.
