India’s electronics sector has emerged as a formidable engine of economic growth, rapidly ascending to become the nation’s second-largest export segment, trailing only petroleum products. This remarkable ascent, however, stands at a critical juncture, demanding a strategic recalibration from an assembly-led growth model to one rooted in deeper component manufacturing and a robust integration into advanced global value chains. The Niti Aayog, India’s premier policy think tank, in its latest Trade Watch Quarterly (Q2 FY26), underscored this imperative, highlighting the need to unlock the next phase of sustainable growth and enhance the sector’s contribution to the national economy.
Over the past decade, India’s electronics exports have demonstrated an exceptional trajectory, expanding at a compound annual growth rate (CAGR) of 17.2% between 2015 and 2024. This growth significantly outpaced the global electronics trade’s average expansion of 4.4% during the same period, signaling India’s burgeoning presence in the international market. Shipments soared from a modest $8.6 billion in 2015 to an impressive $42 billion by 2024, now constituting a substantial 10% of India’s total export basket. This export prowess is mirrored by a vibrant domestic manufacturing landscape, with production witnessing a nearly six-fold increase from ₹1.9 lakh crore in FY15 to ₹11.3 lakh crore in FY25. This expansion has translated into a 3.4% contribution to India’s Gross Domestic Product (GDP) and the creation of approximately 2.5 million jobs, underscoring the sector’s pivotal role in industrialization and employment generation.
Despite these commendable achievements, a closer examination reveals that much of this growth remains concentrated within specific sub-segments, particularly mobile phones and telecom equipment, which collectively account for over 52% of India’s electronics export portfolio. This concentration reflects a predominant reliance on assembly-led manufacturing, where India serves as a final assembly hub rather than a significant producer of high-value components. While this model has successfully propelled India into a competitive position in mobile phone exports, capturing a 3.5% share in global demand, it concurrently exposes a significant vulnerability: heavy import dependence for critical, high-value components.
The Niti Aayog report meticulously points out this structural imbalance, emphasizing the nation’s reliance on imported integrated circuits (ICs), semiconductors, batteries, and display panels. The segment of integrated circuits, for instance, represents a colossal 26.2% of global electronics demand. Yet, India’s export share in this crucial category languishes at a mere 0.02%. This stark disparity is further illuminated by the fact that India imported an astounding $23.8 billion worth of chips in 2024 alone, starkly highlighting the existing gaps in domestic manufacturing capabilities for advanced components. The global demand landscape is evolving rapidly, with growth increasingly gravitating towards core components and enabling technologies, rather than solely finished products. This global shift creates a significant mismatch with India’s current export structure, which is largely geared towards end-products.
The ramifications of this assembly-centric model are evident in the nation’s electronics trade balance. In 2024, India’s total electronics exports stood at $42.1 billion, while imports escalated to $100.6 billion, culminating in a substantial trade deficit of $58.5 billion within the segment. This deficit underscores the economic leakage inherent in importing high-value components for assembly and subsequent export, eroding the overall economic benefit of the export surge. Geographically, global electronics trade remains intricately woven around East Asia, where powerhouses like China, Taiwan, South Korea, and Vietnam are deeply entrenched in component-intensive production networks. These nations benefit from dense intra-Asian processing trade, characterized by complex supply chains where components are manufactured, assembled, and re-exported multiple times across borders before reaching the final consumer. In contrast, India predominantly functions as a final-assembly hub, exporting finished electronics primarily to consumption markets such such as the United States and the United Arab Emirates, rather than actively participating in the more lucrative, component-driven intra-Asian trade flows.
To rectify this imbalance and propel India into the upper echelons of the global electronics value chain, the Niti Aayog advocates for a decisive transition from assembly-driven expansion to component-led manufacturing. This strategic shift necessitates a multi-pronged approach, encompassing sustained investment in research and development (R&D) to foster indigenous innovation, attracting anchor investments from global leaders to establish advanced manufacturing facilities, and rationalizing customs duties to create a level playing field for domestic production. Furthermore, the report calls for comprehensive logistics reforms to enhance supply chain efficiency, predictable domestic procurement policies to ensure a stable market for local manufacturers, and measures to reduce structural cost disadvantages that currently hinder Indian enterprises. Strengthening export financing mechanisms is also crucial to empower businesses to compete effectively on the global stage.
Beyond the electronics sector, the Niti Aayog’s report offered a broader perspective on India’s trade performance in Q2 FY26. Overall merchandise and services exports collectively registered an impressive 8.5% year-on-year growth, outstripping the 4.5% rise in imports. Merchandise exports reached $108 billion, an 8.4% increase, while imports grew by 5% to $196 billion. Services exports surged by 8.7% to $102 billion, with services imports rising by 3.8% to $51 billion, resulting in a robust services trade surplus of $50.9 billion for the quarter. Despite this, the cumulative goods and services trade balance remained in deficit at $37 billion, reiterating the importance of enhancing manufacturing value-addition across sectors, especially in electronics. The quarter witnessed significant momentum in specific categories, with electrical machinery exports soaring by 33.4%, while fertilizer imports saw a dramatic 239% increase from the previous year. Trade destinations remained largely consistent, with strong export growth observed in key markets such as Hong Kong, China, and the US, and a notable 48% increase in imports from the United Arab Emirates. The report also highlighted a broader global trend of increasing South-South trade, noting that exports among developing economies surged from approximately $1.8 trillion in 2005 to $7.3 trillion in 2024, surpassing their exports to developed economies. This shift presents an additional avenue for India to diversify its trade partnerships and strengthen its position in emerging markets.
Industry leaders resonate with the Niti Aayog’s call for a strategic pivot. R.K. Bhatnagar, Director General of Voice of Indian Commtech Enterprises (VOICE), representing Indian communications and technology firms, emphasized, "The rapid rise in electronics exports undeniably demonstrates the deepening of India’s manufacturing ecosystem, particularly within the mobile device segment. However, for sustained growth and to improve the electronics trade balance, the next wave must emanate from bolstering domestic component manufacturing and substantially reducing our reliance on imported semiconductors and other high-value parts. This requires consistent policy support, competitive financing, and stronger integration into complex global supply chains."
Echoing this sentiment, Mukesh Vasani, Chairman & Managing Director of Aimtron Electronics, an electronics system design and manufacturing (ESDM) company, articulated the industry’s proactive stance: "We perceive this moment as a structural inflection point for the industry. Our strategic roadmap is being meticulously aligned towards achieving higher value-addition, cultivating advanced manufacturing capabilities, and fostering deeper global market integration. Our ambition is clear: to scale our revenues three to four times over the coming years as India strategically advances up the electronics value chain."
Achieving this ambitious transformation will require a concerted effort across multiple fronts. Beyond policy directives, it demands significant investment in skill development, fostering a talent pool capable of advanced manufacturing and design. The success of nations like South Korea and Taiwan in dominating semiconductor and display panel manufacturing was built on decades of strategic government support, massive R&D spending, and the cultivation of a highly specialized workforce. India can draw lessons from these models, adapting them to its unique economic and industrial landscape. This includes incentivizing private sector R&D, establishing state-of-the-art testing and certification facilities, and creating a robust ecosystem for intellectual property generation. Furthermore, exploring innovative financing models and encouraging domestic champions to invest in capital-intensive component manufacturing will be crucial.
In essence, India stands at a pivotal juncture. The impressive growth in electronics exports has laid a strong foundation, but to truly unlock its potential as a global electronics manufacturing powerhouse, the nation must transcend its role as an assembly hub. By strategically moving towards component-led manufacturing, driven by innovation, deep integration into global supply chains, and robust policy support, India can not only sustain its export momentum but also significantly improve its trade balance, create higher-value jobs, and enhance its technological self-reliance on the world stage. The blueprint for the next phase of growth is clear: build from within, innovate for the world.
