India approves schemes aiming to become an Electronics Manufacturing Hub

By Prasenjit Dhar

In good news for UK manufacturers looking at the opportunities in India, the Government of India has recently approved a Rs 450 billion (around £4.9 billion) incentive schemes to fulfil India’s aspiration to become a major global hub for electronics manufacturing.

First of all, the Indian government aims to boost an export-led electronic manufacturing strategy at a global scale and make Indian manufacturing globally competitive. In addition, the Government wants to boost domestic manufacturing and attract large investments in mobile phone manufacturing and specified electronic components, including assembly, testing, marking and packaging (ATMP) units.

The three-pronged approach, set-out below, is focused on enabling large scale electronics manufacturing and attracting fresh investments which could potentially generate manufacturing revenue of around £110 billion over the next 5 years. The Indian Government expects these schemes to help generate over 2 million direct and indirect jobs, and lead to exports of over £50 billion over the same period.

Of the total amount, about £4 billion would be disbursed to companies based on first production-linked incentive (PLI) scheme aimed mainly for large scale electronics manufacturing. Under the second scheme, around £500 million will be offered under a proposed capital subsidy, or reimbursement. Financial incentive of 25 percent of capital expenditure for the manufacturing of goods will be offered under this scheme. The third related scheme is for the setting up of Electronics Manufacturing Clusters (EMC) 2.0, which the government feels will help create the necessary infrastructure along with industry specific facilities like common facility centres and ready built factory sheds. The government has allocated around £400 million towards this to be used over the next 8 years.

The Government of India (GoI) is endeavouring to ensure the new policy is compliant with World Trade Organization guidelines and the support is not directly linked to exports. They, however, want to put in tough qualification criteria to ensure the funds are not used by those who manufacture devices only for the domestic market.

These new measures come at a time when the world is battling the coronavirus epidemic and is facing disrupted global supply chains. Experts feel that this move is likely to give a major push to big global manufacturers such as Apple, Samsung, Huawei, Oppo and Vivo, besides contract manufacturers like Foxconn and Wistron to bring their global supply chains to India. This will help create a cutting-edge, sustainable electronics manufacturing ecosystem.

Meanwhile, GoI also understands that their aspirations for setting up electronics manufacturing hubs will be difficult to realise unless domestic players with access to relevant technologies and manufacturing expertise are present to partner with the international companies. The Indian finance minister has announced that the government is working on a scheme to boost local electronics production, but said details would be unveiled later. The draft proposals have been shared with various Indian ministries and departments including revenue, expenditure, economic affairs, commerce, Department for Promotion of Industry and Internal Trade, Ministry of Electronics & Information Technology (MeitY), Niti Aayog CEO and the Directorate General of Foreign Trade (DGFT) for comments.

If these schemes help India achieve its aspirations, industry experts hope that this exercise will also get extended to other related electronic products in sectors including Medical Devices, IT, Datacom and Industrial. The potential can be much larger and wider.

India must also realise that it will face major competition from other countries, including some from south-east Asia, Brazil, Mexico and others.

Internally for India, there will be a requirement for streamlining of policies including those related to land and labour laws, import duties and customs clearances. India has improved on ease of doing business in recent years, as outlined in our annual Doing Business in India Report, though significant barriers do remain. View our latest 2019 report here.

At the same time, upgrading of manufacturing technologies and upskilling will also be necessary. You can read our full set of recommendations in our report How the UK can make in India.

This then potentially opens up major areas of collaboration with countries like the UK. UK manufacturers, especially those which are part of global supply chains, will focus on India in a big way. Major opportunities are also likely for manufacturing technology and training providers.

We at UKIBC will be very happy to support some of these players through our ongoing “Access India Programme” that we deliver on behalf of the High Commission of India in London. AIP helps small to medium UK companies enter the Indian market through expert mentoring, networking opportunities and market entry support services and is the first of its kind for supporting UK businesses access the Make in India initiative of the Government of India.

UKIBC has been working closely several UK manufacturers and advising them on their entry into India. We will be very happy to support you. View our offering, including market entry, consultancy and membership, here.

For more information on the incentive scheme, or to find out about our Access India Programme or other UKIBC initiatives in the Advanced Engineering (including Aerospace & Defence, Automotive, Manufacturing and Technology Collaboration) and Energy sectors, please feel free to get in touch with Prasenjit Dhar at prasenjit.dhar@ukibc.com


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