India’s recent encouragement to allure businesses to move away from China is seen to be making progress, with companies like Samsung and Apple Inc.’s assembly partners are showing interest in investing in the South Asian nation.
India’s PM Narendra Modi’s BJP government in March had announced incentives to make niche firms, electronics manufacturers eligible for a payment of 4 % – 6 % of their incremental sales in the next five years. Due to this, around two dozen companies pledged $1.5 billion of investments to set up mobile-phone factories in India. The step is a part of Prime Minister Narendra Modi’s calls for a self-reliant India aimed at boosting local manufacturing and reducing dependence on imports.
Other than Samsung, Hon Hai Precision Industry Co, has also shown interest regarding this. Similar incentives have been extended to pharmaceutical businesses and plan in order to cover more sectors including automobiles, textiles, and food processing under the program.
These companies are presently actively looking to diversify supply chains in the middle of the ongoing US-China trade tensions and the coronavirus outbreak. The situation has still proved to be big gains for India despite the nation making it cheaper for businesses to open shop. According to a recent survey by Standard Chartered Plc Vietnam remains the most favored destination, followed by Cambodia, Myanmar, Bangladesh, and Thailand.
How setting up mobile phone factories by companies helpful for India
The program for electronics is expected to alone could lead to $153 billion worth of manufactured goods over the next five years. The government expects this to create about one million jobs directly and indirectly.
In the next 5 years, an additional investment of $55 billion could be expected through this. It is expected to add 0.5% to India’s economic output. This could lead to a shift of an additional 10% of global smartphone production to India in five years most of it from China.
This proves to play a catalyst in PM Modi’s goal to grow the share of manufacturing in the economy to 25% from the current which is 15% as part of his ‘Make in India’ program. BJP government has already lowered taxes on companies to among the lowest in Asia. This is done in order to attract new investments in an economy, that is headed for its first contraction in more than four decades this year.
An analyst at BofA Securities Amish Shah, said in a report to clients, “The latest output-linked incentive plan is a “big win for Make in India.”
An expected gain for industrials, cement, pharmaceuticals, metals, and logistics, with long-term indirect benefits across many sectors is seen upcoming with such scenarios taking place.
However, experts suggest that the move is not against any country but is India positive. The aim for such decisions is for India to become a big global player in the electronics manufacturing segment.
Chief India economist at Deutsche Bank AG said,
“There is a reasonable chance for India to gain in terms of incremental investment of supply chains within the country over the medium term. These programs are aimed at increasing India’s manufacturing share in the gross domestic product.”