NEW DELHI – India has announced nearly $ 1 billion in incentives to persuade companies to make more computers in India, hoping to reduce its trade deficit and attract manufacturers trying to diversify from production in China.
The Indian cabinet on Wednesday approved a rewards program for businesses that are expanding local production of laptops, tablets and other computers. New Delhi said it would give companies cash equal to up to 4% of the value of their sales, depending on how much they increase domestic production during the four years from April.
“Our focus is to bring the world’s five best world champions to India and produce for the world,” Electronics and Information Technology Minister Ravi Shankar told a news conference. ‘Before we announced the incentives, we talked to key manufacturers. They are just waiting. ”
India is positioning itself as a smartphone manufacturing hub amid a trade war between America and China that disrupted global supply chains and technology companies like Apple and Samsung were looking for alternatives for China to manufacture their products. Photo: Olivier Le Hellard for The Wall Street Journal
Indian authorities already discuss new incentives with Apple Inc.
who have not yet started making laptops or tablets in India, as well as HP Inc.
which is present in India, said one government official.
A spokesman for Apple India did not respond to a request for comment. HP did not respond to a request for comment on Wednesday.
The cash distribution is part of Prime Minister Narendra Modi’s broader plans to make India independent in electronic goods, while becoming a global leading provider.
The Indian economy has been hit harder than most by Covid-19. India’s gross domestic product shrank by more than 15% in the six months to September, making it one of the most important economies for that period.
As the number of daily infections decreased, it looked for ways to cause further spending and growth. It has eased restrictions on some foreign investment – for example in insurance companies – and announced tax cuts and other incentives in the hope that local and international companies will spend on more facilities to create jobs.
New Delhi hopes to use a combination of rates and benefits to convince companies to earn more in India. Currently, India imports more than 80% of the laptops and tablets sold in the country, most from China, according to a study report by the Indian Cellular and Electronics Association and Ernst & Young.
“Before we announced the incentives, we talked to key manufacturers,” said Ravi Shankar Prasad, Minister of Electronics and Information Technology. “They’re just waiting.”
Photo:
Naveen Sharma / Zuma Press
Laptop imports have risen more than 40% over the past five years to about $ 4.2 billion as demand for devices has risen with revenue and millions more Indians going. Despite the growing domestic demand, Indian producers could not compete with the imports on the price.
The new incentives of New Delhi are needed to make the domestic industry competitive, said Pankaj Mohindroo, chair of ICEA, a lobby group representing the electronics sector in India. With the right government support and infrastructure, India will eventually be able to manufacture 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 mostly manufactured locally. According to Counterpoint Research, a market analysis firm, imports accounted for 78% of the market in 2014 and are now at 8%.
The shift to local smartphone production has helped drive billions of dollars in investment and create jobs such as Samsung Electronics Co.
set up its largest factory in the world outside Delhi and Foxconn Technology Group makes iPhones and other high-end smartphones near the southern city of Chennai.
The government hopes rising labor costs in China, the geopolitical trade and security environment and the coronavirus outbreak will force global companies to look to alternative destinations such as India to diversify their supply chains.
The new incentive program is expected to generate direct and indirect jobs for nearly 180,000 people, leading to $ 45 billion in production, more than 75% of which will be exported by March 2025, according to a statement from the IT ministry on Wednesday.
Even before Covid, India was trying to attract new investment and offer its massive workforce as an alternative to China’s.
Some manufacturers have been looking for ways to reduce their dependence on China, as rising trade tensions as well as the Covid-19 crisis have made them realize that their supply chains were vulnerable.
“India is definitely striving for a production hub like China,” he said. Mohindroo, ICEA, said.
Write to Rajesh Roy by [email protected]
Corrections and reinforcements
An earlier version of this article was misspelled by Ernst & Young. (Corrected on February 24.)
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