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$23 billion incentive programme in the works to boost manufacturing in India

The government is planning incentives worth $23 billion to attract companies to set up manufacturing plants in the country. The production-linked incentives would be offered to automobile manufacturers, solar panel makers, consumer appliance companies, while textile units, food processing plants, specialised pharmaceutical product makers are also being considered.

The incentive programme is modelled on the template of the production-linked incentives (PLI) scheme that the government implemented earlier this year. In response to the scheme, companies such as Samsung, Foxconn and Wistron pledged $1.5 billion of investments to set up mobile-phone factories in the country.

"The move will definitely have a positive impact on manufacturing, especially for so-called booming sectors such as solar and electronics. It is a good way of attracting investments and has potential to make a difference in these sectors," Madan Sabnavis, chief economist at Care Ratings told Bloomberg. The government is also planning to introduce a phased manufacturing programme for other sectors to increase value-addition. This programme is currently implemented for components and accessories used for mobile phones. It is likely to be extended to furniture, plastics, toys and low-value consumer durables, most of which is currently imported from China, mentioned the news site. Details of both the programmes are being framed and would be up for approval of the Cabinet soon.

Amid an economic slump -- GDP contracted 23.9% in Q1 -- the government is working to attract investments to revive the economy. Insolvency rules were also overhauled to improve ease of doing business and corporate taxes are too among the lowest in Asia. However, Vietnam continues to be the most favoured destination for manufacturers.


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