India approves $1 bn plan to enhance IT product manufacturing

India on Wednesday approved a 73.5 billion rupee or $1.02 billion plan to boost local manufacturing and exports of IT products such as laptops, tablets, personal computers and servers.
Robots in telecom manufacturing
The production-linked incentive (PLI) plan will help India in exporting IT goods worth 2.45 trillion rupees, minister Ravi Shankar Prasad told a news conference.

It provides manufacturers cash-backs of between 1 percent and 4 percent of additional sales of locally made goods over four years, with 2019-2020 as the base year.

“The focus of the scheme is to get global champions to India and to make national champions out of local manufacturers,” Prasad said, adding that the plan could create roughly 180,000 jobs.

The PLI plan is also likely to help U.S. tech giant Apple Inc assemble some of its iPad tablets in India, Reuters previously reported.

Prime Minister Narendra Modi’s policy push in the electronics sector has prompted Apple suppliers Foxconn and Wistron to expand in India, and driven Pegatron to set up base there.

The three Taiwan companies have committed to invest roughly $900 million to make iPhones in India as part of a $6.7 billion PLI plan launched by the government last year.

Modi’s strategy, coupled with India’s huge market, have also helped turned the country into the world’s second-biggest mobile maker after China.

New Delhi now wants to replicate the success of smartphone manufacturing with other electronics in a bid to cut imports.

The federal cabinet last week approved a $1.68 billion plan to promote local manufacturing and export of telecoms and networking gear.

The scheme proposes production linked incentive to boost domestic manufacturing and attract large investments in the value chain of IT hardware. The target segments under the proposed scheme include laptops, tablets, all-in-one PCs and servers, said an official statement.

The scheme will extend an incentive of 4 percent to 2 percent / 1 percent on net incremental sales (over base year i.e. 2019-20) of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four years.

The scheme is likely to benefit five major global players and 10 domestic champions in the field of IT hardware manufacturing including laptops, tablets, all-in-one PCs, and servers.

The scheme has an employment generation potential of over 1.8 lakh direct and indirect jobs over four years.

The scheme will provide impetus to domestic value addition for IT hardware which is expected to rise to 20-25 per cent by 2025.