India plans to offer incentives worth 1.68 trillion rupees ($ 23 billion) to attract companies to establish manufacturing in the South Asian nation, people with knowledge of the matter said.
The government of Prime Minister Narendra Modi will offer production-linked incentives to automakers, solar panel makers and specialty steel to consumer appliance companies, according to documents reviewed by Bloomberg News. Textile units, food processing plants and manufacturers of specialized pharmaceutical products are also being considered for the plan.
The incentive program, spearheaded by the country’s policy planning body, uses the template from a scheme implemented earlier this year to drive companies away from China. About two dozen companies, including Samsung Electronics Co., Hon Hai Precision Industry Co., known as Foxconn, and Wistron Corp., pledged $ 1.5 billion in investments to set up mobile phone factories in the country, according to the government, after that the authorities offered to pay. them an amount equivalent to 4% -6% of their incremental sales during the next five years.
New Delhi has been working on attracting investment to revive an economy that posted its worst decline among major economies last quarter, when it contracted 23.9%. Corporate taxes are already among the lowest in Asia, while insolvency rules have been revised to improve the ease of doing business. But those have done little to make it the first choice for companies looking to diversify supply chains outside of China.
Vietnam remains the most favored destination, followed by Cambodia, Myanmar, Bangladesh and Thailand, according to a recent survey by Standard Chartered Plc.
“The move will definitely have a positive impact on manufacturing, especially for the so-called booming sectors like solar energy and electronics,” said Madan Sabnavis, chief economist at Care Ratings Ltd. “It’s a good way to attract investment and has potential to make a difference in these sectors ”.
The government also plans to introduce a phased manufacturing program for other sectors to allow companies to gradually increase local value added. It is proposed to expand the program, currently in vogue, for components and accessories used for mobile phones, for furniture, plastics, toys, and low-value consumer durables. Most of these items are currently imported from China.
Details of both programs are being worked out and will soon be submitted to the federal Cabinet for approval, they said.
A spokesperson for Niti Aayog, the government’s policy think tank, did not respond to a call made during business hours.
India imported $ 65 billion worth of goods from China in the year ending March 31, while its exports to the neighboring nation amounted to $ 17 billion, leaving a trade deficit of $ 48 billion, according to the latest government data.
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