NEW DELHI – India announced nearly $ 1 billion in incentives to persuade companies to make more computers in India, in hopes of reducing their trade deficit and attracting manufacturers trying to diversify beyond production in China .
India’s cabinet on Wednesday approved a rewards program for companies expanding local production of laptops, tablets and other computers. New Delhi said it would give companies cash equivalent to up to 4% of the value of their sales, depending on how much domestic production increases during the four years starting in 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, said at a press conference. “Before announcing the incentives, we have had discussions with key manufacturers. They’re just waiting. “
Indian authorities are already discussing the 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, said a government official.
A spokesperson for Apple India did not respond to a request for comment. On Wednesday, HP did not respond to an email seeking comment.
The cash gift is part of Prime Minister Narendra Modi’s broader plans to try to make India self-sufficient in electronics and at the same time make it one of the world’s leading suppliers.
India’s economy has been hit harder than most by Covid-19. India’s gross domestic product contracted more than 15% in the six months to September, making it one of the worst performing major economies in that period.
As the number of daily infections has plummeted, you’ve been looking for ways to drive more spending and growth. It has eased restrictions on some foreign investments, in insurance companies, for example, and has announced tax breaks and other incentives in the hope that local and international companies will spend on more facilities, creating jobs.
New Delhi hopes to use a combination of tariffs and benefits to persuade companies to do more in India. India currently imports more than 80% of the laptops and tablets sold in the country, most of it from China, according to a study report by the Indian Association of Cellphones and Electronics and Ernst & Young.
Its laptop imports have risen more than 40% in the past five years to around $ 4.2 billion as demand for the devices has increased with revenue and millions more Indians connected. Despite growing domestic demand, Indian manufacturers have not been able to compete on price with imports.
New Delhi incentives are necessary to make the domestic industry competitive, said Pankaj Mohindroo, president of ICEA, a lobby group representing the electronics sector in India. With the right government support and infrastructure, India could eventually end up producing more than 20% of the world’s cell 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 is now mainly produced locally. Imports accounted for 78% of the market in 2014 and are now at 8%, according to Counterpoint Research, a market analysis firm.
The shift to local smartphone production has helped generate billions of dollars in investment and created jobs, such as Samsung Electronics. Co.
has established its largest facility in the world outside of Delhi and Foxconn Technology Group is manufacturing iPhones and other high-end smartphones near the southern city of Chennai.
The government hopes that rising labor costs in China, the geopolitical trade and security environment, and the coronavirus outbreak will force global companies to seek alternative destinations like India to diversify their supply chains.
The new incentive program is expected to generate direct and indirect employment opportunities for almost 180,000 people and lead to a production valued at 45,000 million dollars, of which more than 75% will be exported until March 2025, according to a statement from the Ministry from TI on Wednesday.
Even before Covid, India was trying to attract new investment and offer its huge workforce as an alternative to China’s.
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.
“India certainly aspires to be a manufacturing hub like China,” said ICEA’s Mohindroo.
Write to Rajesh Roy at [email protected]
Corrections and amplifications
An earlier version of this article was misspelled as Ernst & Young. (Corrected on February 24).
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