India is planning to provide incentives to attract companies to establish manufacturing in the country, with a total of 1.68 trillion rupees ($23 billion). Prime Minister Narendra Modi’s administration will grant production-linked stimulus to solar panel makers, consumer appliance, automobile manufacturers, and specialty steels companies, according to the documents. Few other manufacturers being considered the incentives are specialized pharma product, food processing and textile units.
The stimulus program led by Indian policy planning body, follows the same arrangement as the previous scheme implemented to draw business away from China earlier this year. The scheme lures around two dozen companies including Foxconn and Wistron Corp and Samsung Electronics Co to pledge an investment of $1.5 billion to set up mobile-phone factories, after the authorities bid on paying an approximately 4%-6% of their incremental sales for over the next five years.
India has been driven to attract investment as a way to rekindle an economy situated in the worst slump among other major economies in Q2 2020, when it contracted as much as 23.9% over the quarter. The country’s corporate taxes positioned one of the lowest in Asia, while insolvency rules were revised to simplify business. Unfortunately, these efforts have done little to make the country the first choice for businesses looking for another supply chain location other than China.
Vietnam is still continuing in the top position as most preferred destinations, with Cambodia, Myanmar, then Bangladesh and Thailand followed as the top five of mind, according to the Standard Chartered Plc recent survey.
Madan Sabnavis, chief economist at Care Ratings Ltd said that the upcoming move will doubtlessly have a positive impact on the manufacturing sectors, especially in the recently-booming sectors such as electronics and solar, and a good way of attracting investment as it has potential to differentiate.
Indian government also arranged to establish a phased manufacturing program, aimed at other sectors in a way of empowering companies in increasing local value-addition gradually. The current program used for accessories and components of mobile phones, is planned to be extended for furniture, toys, plastic and low-value consumer durables, which are mostly in current conditions, imported from China. The details for two programs proposed above are being worked out and in line for the approval from the federal Cabinet.
India export to China until March 31 is settled at $17 billion, while import is at $65 billion, leaving a wide gap of trade deficit as much as $48 billion, according to the latest data from the government.
