Cabinet approves INR 48,042 Crore package to boost Electronic Components manufacturing

John F Kennedy famously quoted “Use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger–but recognize the opportunity.”

At the current level of dependency on China from the raw materials to the finished goods, Coronavirus has hinted the global companies to switch their manufacturing base & discouraging them for the over-reliance only on one country.

India’s total import of electronic goods is whopping INR 4 Lakhs Crore and electronic components account for INR 1 Lakh crore in 2018-19 with China’s share of 38%. To cut the ballooning bill of electronic imports, the current government is therefore trying to please the global mobile phones manufactures to look forward to investing in India by introducing 3 long term policies.

The scheme will give a push to consumer electronics companies like Apple which is scouting for an alternative beyond China as currently 95% of its devices are manufactured there. Samsung has already shown interest in India by investing 5,000 Crore and now it is time for other manufacturing players to reap the benefit of the schemes by increasing the value addition of their products in India.

Cabinet has approved Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing to attract large investments in mobile phone manufacturing. To avail the benefit of this scheme, the company has to invest at least 1,000 crores in the next 4 years for setting up their manufacturing units and will be offered per cent incentive in the first two years, followed by per cent in the next two years and then per cent in the fifth year. The incentive will be available on incremental sales (over the base year) of goods manufactured in India. This will boost India’s manufacturing base thereby integrating “Assemble in India for the world” into “Make in India”.

In addition to PLI, the government has approved Promotion of manufacturing of Electronic Components and Semiconductors. In the said scheme, the financial incentive of 25% of capital expenditure on plant, machinery, equipment, associated utilities and technology, including for Research & Development for the manufacturing of electronic components & semi-conductors will be provided. This scheme will strengthen the electronic manufacturing ecosystem in the country. Application to avail the incentive will be open for 3 years and the investment has to be made within 5 years from the date of application. The funds will be allocated within 8 years.

To offset the deficiency in the reliable infrastructure, Electronic Manufacturing Clusters (EMC) was notified in 2012. To set-up a world-class infrastructure & making it attractive for the global players, Cabinet has approved financial assistance EMC 2.0. This will drive the entrepreneurship ecosystem, innovation & deepen the supply chain in the country.

However, Vietnam’s lucrative policies like tax exemption for the high technology sector, reduction of land rental & preferential credit terms have already shown a commendable impact on their economy and investment in their country.

As it is turning out “Made in China” is not cheap anymore as the wages for Chinese workers has been on a rise, spiking 64% from 2011, it is time to turn the spotlight on India which has both an affordable labour and requisite technology for Research & development.

Amidst the gloom in India’s economic data, India’s Exports of Electronic goods has already shown a considerable increase by 38% in 2018-19 from 2017-18 amounting to Rs 65,000 Crore. This new move will further push India’s place, bringing it amongst the top 5-6 players.

Therefore, proactive measures like these will definitely make India a $5 trillion economy & a global player in the field of Electronic Manufacturing.

Source- Press Release by Union Cabinet Dated 21.03.2020.

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