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The Union Cabinet on Wednesday extended the production-linked incentive (PLI) scheme for the pharmaceutical and technology hardware sectors, approving 15,000 crore and 7,325 crore worth of incentives, respectively, to encourage domestic manufacturing.

The cabinet, chaired by Prime Minister Narendra Modi, said the PLI scheme for pharma will be effective over FY21-FY29, while manufacturers of laptops, tablets, all-in-one personal computers and servers, will enjoy the benefits for a four-year period. The move will boost local manufacturing and reduce India’s dependence on imports.

The government estimates the scheme will help the pharma sector clock incremental sales of 2.94 trillion and incremental exports worth 1.96 trillion during the six years, while the IT hardware segment will be able to build production capacity worth 3.26 trillion, of which 75%, or 2.45 trillion, will be for exports, in the next four years. The government also expects the top five global manufacturers of laptops and tablets, including Apple, Dell and HP, to set up local units.

The PLI scheme for pharmaceuticals, the government said, is expected to generate employment for both skilled and un-skilled personnel, estimated at 20,000 direct and 80,000 indirect jobs.

“The objective of the scheme is to enhance India’s manufacturing capabilities by increasing investments and production in the sector, and contributing to product diversification to high-value goods in the pharmaceutical sector," electronics and information technology minister Ravi Shankar Prasad said.

It is expected to promote innovation for the development of complex and high-tech products, including emerging therapies and in-vitro diagnostic devices, besides building self-reliance in key drugs. It is also expected to improve accessibility and affordability of medical products, including orphan drugs, for the Indian population, it added.

The manufacturers of pharmaceutical goods registered in India will be segregated based on their global manufacturing revenue (GMR) to ensure wider applicability of the scheme across the industry and to meet the objectives of the scheme.

The Indian pharma industry, the third-largest in the world by volume, is worth 4,000 crore, and contributes 3.5% of total drugs and medicines exported globally. India exports pharma products to over 200 countries, including highly regulated markets such as the US, the UK, European Union and Canada.

At present, low-value generic drugs account for a majority of Indian exports, while a large part of the domestic demand for patented drugs is met through imports. At present, local pharma companies lack high-value production capabilities and the necessary research and development centres.

The government expects the IT and hardware industry to receive additional investment of 2,700 crore, besides earning direct and indirect revenue of 15,760 crore, besides creating 180,000 jobs in four years.

“Production-linked incentive is a very simple term. Come to India, invest in India, set up your factory, manufacture produce, export outside and earn incentive. We have already discussed the scheme with the manufacturers," Prasad added.

“The scheme shall extend an incentive of 4% to 2%, 1% on net incremental sales (over base year i.e. 2019-20) of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four years," an official statement said.

India imported laptops and tablets worth $4.21 billion and $0.41 billion, respectively, in 2019-20. The market for IT hardware is dominated by seven global companies, which account for about 70% of the world’s market share.

“These companies are able to exploit large economies of scale to compete in global markets. It is imperative that these companies expand their operations in India and make it a major destination for manufacturing of IT hardware," it added. The move comes at a time when global manufacturers are looking to diversify their manufacturing locations to mitigate the risks involved in depending on a single market.

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