InvestorQ : Why is Indian government making huge concessions to manufacture cell phones in India?
Anu Biswas made post

Why is Indian government making huge concessions to manufacture cell phones in India?

Neelam Naik answered.
2 years ago

This is clearly a move to wean away production from China into India. Towards this end in view, the government is planning to unveil a Rs.36,000-crore fund to provide production-linked incentives (PLI) to smart phone makers. The whole idea of the exercise is to wean high-end electronic manufacturing away from China and Vietnam to India. These announcements are not confirmed but are expected in the Budge 2020. Work has already started on production linked incentives (PLI) only companies which are going to make India an electronics manufacturing and export hub will get these incentives.

The primary aim of this policy is to attract global manufacturers like Apple and Samsung to make India their manufacturing and export base instead of China and Vietnam as they are doing now. This will be achieved through a series of incentives like credit guarantee schemes and interest subvention schemes. It may be recollected that Narendra Modi has also met with manufacturers including representatives of Apple and Samsung. Based on the feedback received, the government has fast-tracked modalities of incentives. The targets are truly ambitious to achieve smart phone exports from India of $110 billion by 2025, although it is currently just around $3 billion. That remains a tall target but even if the government can get half way through, it will be a great achievement.

It is anticipated that the above PLI scheme will replace the duty credit scrip scheme which is on right now. However, in the past India has struggled to position itself as a manufacturing hub and countries like China, Vietnam and even Bangladesh have managed better. That is largely due to cheaper labour cost and better land and water infrastructure. That is something India really has to work on..