NEW DELHI: India announced nearly $ 1 billion in incentives to persuade companies to manufacture more computers in India, in hopes of reducing the trade deficit and attracting manufacturers trying to diversify from production to China.
India’s cabinet on Wednesday approved a rewards program for companies that expand local production of laptops, tablets and other computers. New Delhi said it would give companies cash up to 4% of the value of their sales, depending on how much they increase domestic production over the four years from April.
“Our goal is to bring the top five world champions to India and produce for the world,” Ravi Shankar Prasad, Minister of Electronics and Information Technology, told a news conference. “Before announcing the incentives, we had discussions with key manufacturers. They just wait. “
India is positioning itself as a hub for smartphone production amid a trade war between the United States and China that has disrupted global supply chains and left technology companies like Apple and Samsung looking for alternatives to China to manufacture its products. Photo: Olivier Le Hellard for The Wall Street Journal
Indian authorities are already discussing new incentives with Apple Inc.
which has not yet started manufacturing laptops or tablets in India as well as HP Inc.
which has a presence in India, a government official said.
An Apple India spokesman did not respond to any requests for comment. On Wednesday, HP did not respond to any email search messages.
Cash delivery is part of Prime Minister Narendra Modi’s broader plans to try to make India self-sufficient in electronic products, making it a world-class supplier.
India’s economy has been hit harder than most by Covid-19. India’s gross domestic product contracted by more than 15% in the six months to September, making it one of the top performing economies in this period.
As the number of daily infections has decreased, ways have been sought to trigger additional spending and growth. It has eased restrictions on some foreign investment (e.g. in insurance companies) and announced tax breaks and other incentives in hopes that local and international companies will spend on more facilities, creating jobs.
New Delhi hopes to use a combination of tariffs and benefits to convince companies to do more in India. India currently imports more than 80% of laptops and tablets sold in the country, most from China, according to a study report by the Indian Cellular and Electronics Association and Ernst & Young.
“Before announcing the incentives, we had discussions with key manufacturers,” said Ravi Shankar Prasad, Minister of Electronics and Information Technology. “They’re waiting.”
Photo:
Naveen Sharma / Zuma Press
Its laptop imports have risen more than 40% in the last five years to about $ 4.2 billion as demand for devices has risen with revenue and millions more Indians online. Despite growing domestic demand, Indian manufacturers have not been able to compete for price with imports.
New Delhi’s new incentives are needed to make the domestic industry competitive, said Pankaj Mohindroo, president of ICEA, a pressure group representing the electronics sector in India. With the right government support and infrastructure, India could end up producing more than 20% of the world’s mobile phones, laptops and tablets, he said.
New Delhi hopes that the laptop and tablet industry can follow in the footsteps of the smartphone industry. India’s smartphone market used to be dominated by imports, but now it is mostly produced locally. Imports accounted for 78% of the market in 2014 and now stand at 8%, according to Counterpoint Research, a market analysis firm.
The shift to local smartphone production has helped drive billions of dollars in investment and created jobs such as Samsung Electronics Co.
has established its largest facility in the world outside Delhi and Foxconn Technology Group manufactures iPhones and other high-end smartphones near the southern city of Chennai.
The government hopes that rising labor costs in China, the trade and security geopolitical environment and the outbreak of coronavirus will force global companies to look for alternative destinations like India to diversify their supply chains.
The new incentive program is expected to generate direct and indirect employment opportunities for nearly 180,000 people and lead to production valued at $ 45 billion, more than 75% of which will be exported by March 2025. , according to a statement from the IT ministry on Wednesday.
Even before Covid, India was trying to attract new investment and offer its massive workforce as an alternative to that of China.
Some manufacturers have been looking for ways to reduce their dependence on China, as growing trade tensions and the Covid-19 crisis have made them realize that their supply chains were vulnerable.
“Without a doubt, India aspires to be a manufacturing hub like China,” said Mohindroo of the ICEA.
Write to Rajesh Roy at [email protected]
Corrections and amplifications
In an earlier version of this article Ernst & Young was misspelled. (Corrected on February 24).
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