Amid globally reducing interest towards manufacturing in China, the Indian government has now brought in a new slew of benefits to attract India as a replacement unit. IT minister Ravi Shankar Prasad announced the launch of $6 Bn plan to boost electronics manufacturing, saying it would start by offering five global smartphone makers incentives to establish or expand domestic production.
The government is offering a production-linked incentive (PLI) worth from 4% to 6% of additional sales of goods made locally over five years, with 2019-2020 as the base year. The government said that it planned to help five global smartphone manufacturers set their production facilities in India with the PLI scheme. This would reportedly include major global players including Apple, Samsung, Oppo, Vivo, Xiaomi, Foxconn, Wistron and Flex, which had shown interest in applying.
Five Indian companies would also be selected for the PLI scheme, which, along with two other related initiatives, could help India produce smartphones and components worth INR 10 Lakh Cr ($133 Bn) by 2025. The government will also provide an incentive of 25% on capital expenditure for the production of electronic components, semiconductors, and other parts. The manufacturers will also be offered electronics manufacturing clusters with ready-to-use facilities.
Hon’ble MCIT @rsprasad launched #PLI Scheme that provides incentive ~$6 billion for boosting large scale mobile & components manufacturing in India. Will incentive 5 Global Champions and 5 National Champions in Mobile Manufacturing#ThinkElectronicsThinkIndia#AatmanirbharBharat pic.twitter.com/voIRjoEZet
— Electronics India (@Electronics_GoI) June 2, 2020
To make its scheme more attractive, the government has dropped a few clauses from its production-linked incentive (PLI) scheme including that “evaluated plant and machinery brought into India at 40% of its value” which was opposed mainly by Apple.
It also agreed to a few other changes which include giving investors a say in future changes to the PLI scheme, removal of various caps, and another clause which stated that the government would release the incentive despite the industry meeting its targets only if it had the money to do so. Additionally, a clause of force majeure has been added to the scheme which permits the companies to seek reliefs from the set targets during times of natural calamities such as Covid-19.
Prasad said that the move is expected to make India a global hub for mobile phone manufacturing and make smartphones the largest exported item out of India, while also generating half a million jobs.
Amitabh Kant, CEO, Niti Aayog, said, “The schemes will help India become totally self-reliant and penetrate global markets…It will bring global value chain and enable India to become a leader in electronics manufacturing.”
According to Counterpoint’s Market Monitor report, India recorded 158 Mn shipments in 2019 with 7% YoY growth. The report said that the Chinese brands share hit a record of 72% for 2019 compared to 60% in 2018.