This article is part of the UPSC Daily Editorial Analysis, covering The Hindu editorial – " Going electric: On India and the electric vehicle space," published on 28th March, by the best UPSC coaching in Kolkata.
Syllabus: UPSC GS Paper 3 Economy (Infrastructure & Industrial Policy)
India’s decision to exempt import duties on 35 capital goods used in the manufacture of electric vehicle (EV) batteries and 28 items used in mobile phone battery production is a major step towards fostering domestic manufacturing and advancing clean technology adoption. This policy shift that was announced in Union Budget 2025 but later on formalized through the Finance Bill 2025. All these point to India's strategic focus on the EV sector.
India's Electric Vehicle (EV) industry is growing at a fast pace. It is driven by government incentives and increasing environmental awareness and technological innovation. Schemes like Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) India is looking to substantially boost EV adoption.
India has also envisioned an ambitious goal to reach 30% EV private car sales, 70% commercial vehicle sales, 40% bus sales and 80% two-wheeler and three-wheeler sales by 2030. This can mean as many as 80 million EVs on Indian roads. The 'Make in India' campaign further focuses on domestic EV manufacturing.
The global EV market valued at US$ 255.54 billion in 2023 is projected to reach approximately US$ 2,108.80 billion by 2033 growing at a CAGR of 23.42% from 2024 to 2033.
In India:
China remains to be the leading player in the world EV market with EVs occupying 45% of all automobile registrations in China in 2024. In India it stands at a mere 2% for passenger cars. Nevertheless, the electric two-wheeler (e2w) sector has grown rapidly in India with 1.14 million units sold in 2024 comprising 60% of overall EV sales. This suggests increasing domestic interest in EVs but it also points to the difficulties India has in scaling up passenger EV adoption.
Batteries continue to be the most costly part of an EV as they account for 40% (approximately) of the price of the vehicle. This cost element has slowed down the EV adoption in lower-income countries like India. Although the long-term advantage of decreasing oil import dependence is there.
Currently China controls over 70% of the global EV battery supply according to the International Energy Agency (IEA). The emergence of lithium-iron-phosphate (LFP) batteries as an industry standard—due to their lower cost, higher energy density and improved thermal management—has further strengthened China’s lead in this sector. India’s lack of indigenous technological capabilities in battery production has limited its ability to compete on a global scale.
India’s import duty exemptions partially aim to enhance bilateral trade ties with the United States and prevent reciprocal tariffs but the long term goal is to decarbonise the transport sector.
In order to achieve cost reductions and enhance domestic EV manufacturing, India must integrate itself into the global EV battery value chain including both upstream (mining and refining) and downstream (manufacturing and assembly) segments. This would also position India as a viable alternative to China for nations seeking to diversify their supply chains.
India needs to do investments in R&D specifically for battery technology and energy storage applications. This will then give rise to an autonomous and strong ecosystem of battery production. Technology transfer and indigenous manufacture will reduce dependence on imports and enhance homegrown capability in this EV industry.
Government of India has introduced several policies to promote EV adoption. For example:
Duty exemption on capital machinery and goods for the manufacture of lithium-ion batteries.
Cut GST on EVs to 5% from 12%.
Income tax rebate of Rs. 1.5 lakh on interest of EV loan under Section 80EEB.
India’s import duty exemptions on capital goods for EV and mobile phone battery manufacturing is a good step taken for strengthening its domestic EV sector. However, for long-term success India must address challenges such as high battery costs, dependency on Chinese supply chains and limited indigenous manufacturing capabilities. By leveraging favourable trade policies, investing in research and innovation and securing a stronger position in the global battery ecosystem India can accelerate EV adoption and position itself as a leader in clean energy technologies.
India’s electric vehicle sector is set for rapid expansion, backed by government support, strong investment inflows and increasing consumer adoption. With ambitious targets, policy-driven incentives and technological advancements India is about to emerge as a global leader in sustainable mobility. Continued infrastructure development, battery innovation and policy interventions will be crucial in achieving the EV vision for 2030.
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PRACTICE QUESTION Assess the impact of India’s import duty exemptions on EV battery manufacturing and its alignment with EV adoption, domestic production and supply chain diversification. 250 Words. |
1. What is India’s import duty exemption for EV battery manufacturing?
India has exempted import duties on 35 capital goods used for EV battery production to boost domestic manufacturing and reduce reliance on imports.
2. How will this policy impact India’s EV adoption?
Lower production costs will make EVs more affordable, accelerating adoption and helping India meet its 2030 EV targets.
3. Why is India reducing dependence on China for EV batteries?
China controls 70% of the global EV battery supply. India aims to diversify its supply chains and strengthen domestic production.
4. What role does FAME II play in India’s EV growth?
FAME II provides subsidies and incentives for EV adoption, focusing on public transport electrification and domestic EV manufacturing.
5. How does this exemption align with India’s clean energy goals?
It supports the Make in India initiative, enhances supply chain localization and aligns with India’s decarbonization efforts.
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