IT Hardware Manufacturing Investments under PLI 2.0 Reach Just ₹500 Crore.

The Centre’s Production-Linked Incentive (PLI) scheme 2.0 for IT hardware has seen a modest incremental investment of ₹501 crore in 2024, significantly lower than expected. According to data from the Ministry of Electronics and Information Technology (MeitY) presented in the Lok Sabha, this investment has resulted in production worth over ₹10,245 crore. In comparison, the PLI scheme for large-scale electronics has attracted ₹9,349 crore in incremental investment, leading to production worth more than ₹6 lakh crore.

The IT hardware sector's investment figures fall short of last year's projections of ₹2,430 crore, raising concerns about the scheme's progress. However, analysts suggest that investments are expected to rise in 2025 as the government continues to encourage local production.

In May 2023, the Cabinet revised the PLI scheme to boost domestic IT hardware manufacturing, increasing the budget to ₹17,000 crore, extending the tenure to six years, and offering a more attractive incentive package. As many as 38 companies, including global players, have expressed interest in the scheme.

The Manufacturers’ Association for Information Technology (MAIT), which had initially hailed PLI 2.0 as a transformative initiative, declined to comment on the low investment figures.

Bharath Shenoy, Senior Market Analyst at IDC Corporate, attributed the low investments to initial confusion and hesitation in the industry when the scheme was first announced. “There was some panic in the market initially, as the government wanted everything assembled in India overnight. However, over time, the timeline was extended, and now all key vendors have their assembly setups in place,” Shenoy explained. “While the price gap between local assembly and imports still exists, the government is expected to push vendors harder in 2025, leading to greater participation in local manufacturing.”

Shenoy also noted that while India’s dependence on foreign suppliers like China would persist in the short term, the shift towards local assembly is expected to gradually increase, particularly among Original Equipment Manufacturers (OEMs). Companies like Lenovo and Acer have already begun assembling entry-level notebooks in India, setting a precedent for other players in the industry.

Pankaj Mohindroo, Chairman of the India Cellular & Electronics Association, acknowledged the initial inertia in the sector but emphasized that momentum would build over time. He highlighted that incentives could rise up to 13% when factoring in the exclusion of costs like Microsoft OS and CPU, providing a significant stimulus to domestic manufacturing.

Industry experts anticipate that the government will implement stricter measures in 2025, focusing on reducing dependency on imports, especially from China, and fostering a more robust local assembly ecosystem.

HBL