Focusing on localisation in the electronics ecosystem, the first Union Budget post-elections has revamped customs duties on raw materials and equipment, extending support for MSMEs, startups and the renewable energy sector.
Finance Minister Nirmala Sitharaman presented her seventh consecutive Union Budget for 2024-25 as the session commenced on Tuesday morning at the lower house of Parliament. It marks the first budget under the NDA’s third consecutive term of governance.
The Centre’s FY25 capital expenditure remains at ₹11.1 trillion, with infrastructure spending at 3.4% of GDP, unchanged from the Interim Budget presented in February this year.
The Minister sought to encourage local manufacturing and employment, highlighting support for MSMEs, infrastructure, renewable energy, and tax benefits on raw materials and components. However, no specific focus was placed on the electronics sector.
Boosting India’s Semiconductor Ecosystem: MeitY’s Increased Funding
The Finance Minister Nirmala Sitharaman unveiled a significant increase in the allocation for the Ministry of Electronics and Information Technology (MeitY) for the fiscal year 2024-25, marking a 52% rise to ₹219.369 billion. This boost was largely propelled by a substantial 355% surge in capital towards the Modified Programme aimed at strengthening India’s semiconductor ecosystem, with a substantial ₹42.03 billion earmarked specifically for semiconductor facilities.
Additionally, ₹5.5175 billion was allocated to bolster the IndiaAI mission, aimed at enhancing the country’s artificial intelligence infrastructure. However, for the second consecutive year, no funds were allocated for PMGDISHA or digital payments initiatives.
Revised Customs Duties for Electronics
Nirmala Sitharaman announced a cut in basic customs duty (BCD) on smartphones, mobile PCBs, and chargers from 20% to 15%, thus making them cheaper in customers’ interest. She noted that domestic mobile production has tripled, and exports have surged 100-fold in the past six years.
Medical electronics also witnessed adjustments to the BCD on x-ray tubes and flat panel detectors used in medical x-ray machines, aligning these changes with domestic capacity growth under the Phased Manufacturing Programme. Thus, X-Ray equipment becomes more affordable.
Regarding raw materials crucial for high-tech electronics and telecommunications, she announced that 25 critical minerals, including lithium, copper, cobalt, and rare earth elements, would be fully exempted from customs duties, with two of them reduced. The finance minister noted that these minerals are targeted to enhance processing and availability for key industries.
Lower prices of these raw materials would significantly reduce production costs for electronics manufacturers, potentially leading to more competitive pricing and increased accessibility of high-tech devices for consumers worldwide.
In the field of renewable energy, expanding the list of exempted capital goods for manufacturing solar cells and panels was also proposed to support the cheaper energy transition. However, due to sufficient domestic production, the minister noted that customs duty exemptions will not apply to solar glass, glass, and thinned copper interconnects.
Furthermore, she proposed increasing the basic customs duty on printed circuit board assemblies (PCBA) to 15% in Budget 2024-25. This increase in import costs is expected to stimulate local sourcing and manufacturing of telecom equipment, fostering job creation and technology development within the country.
Angel Tax Abolished, Startups to Benefit
Sitharaman proposed eliminating angel tax for all investors and simplifying income tax provisions to reduce disputes and uncertainty. She also suggested simplifying income tax rules for reopening and reassessment, limiting reassessments to five years for income over ₹50 lakh and reducing search case time limits from ten to six years to cut tax-related disputes.
Yashish Dahiya, Chairman and CEO of PB Fintech in London, hailed the abolition of the angel tax as a landmark decision that will remove major obstacles for startups and boost investment.
In addition, a ₹10 billion startup capital fund was announced to expand the space economy fivefold over the next decade.
The minister unveiled several initiatives to boost R&D in priority sectors like agriculture and technology, including a ₹1 trillion funding pool to support private-sector research and commercial-scale innovation.
MSME Push: Mudra Loan Limit increased
MSMEs of all sectors, including electronics and bolstering their capabilities, were primarily focused on the budget. Sitharaman announced a ₹1 billion credit guarantee scheme for MSMEs, offering term loans for machinery and equipment without collateral.
The Mudra scheme loan limit for MSMEs has been doubled to ₹2 million, and a new mechanism to support continued bank credit for stressed enterprises was announced. Export hubs will be established via public-private partnerships to help MSMEs access global markets.
Boost for Renewable Energy
Renewable energy was another focal point in the budget this time. The finance minister introduced the ‘Pradhan Mantri-Surya Ghar Muft Bijli Yojana’ to provide up to 300 free monthly units of electricity to 10 million households. She also announced new RE projects and a pumped storage policy to enhance renewable energy while applauding NTPC and BHEL initiatives in power projects. Post-budget speech, the stocks of domestic RE firms witnessed a slight increase.
Before the session, several experts had outlined anticipations like an export-driven strategy, supply chain optimisation and a supportive environment to support local manufacturing. The consumer electronics industry sought support for GST revisions, infrastructure, and skill development to drive growth and achieve global manufacturing leadership.
Soon after the budget was presented, experts, including Pankaj Mohindroo, Chairman of the India Cellular and Electronics Association (ICEA), expressed that the mobile and electronics industry is thrilled with the recent announcements, believing they will significantly boost manufacturing, exports, and competitiveness.
While the Union Budget 2024-25 addressed many issues and anticipations revolving around the electronics ecosystem, time will prove how effectively these measures will be implemented and support the growth of the electronics sector in India.
