Make in India plan gets cabinet push

The Union cabinet on Wednesday approved a proposal to offer as much as ₹1.45 trillion in incentives to persuade global companies in 10 sectors, including automobiles, drugs and textiles, to set up factories in India as they look to diversify their supply chains amid US-China tension.

The expansion of the production linked incentive (PLI) scheme, which is already in force for electronics production since April, to additional sectors will also help create jobs, Union minister Prakash Javadekar told reporters. “This will benefit all sections of society,” said Javadekar. The PLI scheme now offers manufacturers benefits worth ₹1.97 trillion, including those for electronics production.

Finance minister Nirmala Sitharaman, who was present at the press briefing, said the decision was aimed at giving necessary support to “critical and sunrise sectors” with the idea of making India a part of the global supply chain. There is no cap on the number of companies that can apply to avail of benefits offered under the scheme, Sitharaman said.

The manufacturing sector currently contributes 16% to India’s GDP, Javadekar said, adding that the idea was to increase this. Among the 10 industries, automobile and auto components companies will be offered the maximum incentive of ₹57,000 crore, Javadekar said. Advanced cell chemistry battery, pharmaceuticals, telecom and networking products, food products, specialty steel, high-efficiency solar modules and white goods are among the other sectors included.

The scheme seeks to bring more investments into sectors that offer huge potential such as batteries for consumer electronics, electric vehicles and clean energy projects. Inclusion of the food industry will have a cascading impact on farm and allied sectors, said Anand Ramanathan, a partner at consulting firm Deloitte India.

The move is likely to attract investments from foreign manufacturers and comes at a time when automakers are planning to shift a part of their supply chain network out of China to avoid disruptions in operations.

The government has been urging automakers to slash import of components, especially from China, and boost exports.

“We are hopeful that the outlay announced will encourage the industry to become a net-exporter and help reduce import dependence,” said Deepak Jain, president, Automotive Component Manufacturers Association. Jain said auto components industry exports a fourth of its output and the sops will help the sector boost its share in global trade.

Kenichi Ayukawa, president, Society of Indian Automobile Manufacturers, said the industry was eagerly waiting for the scheme to increase its competitiveness and to take growth to the next level.

The PLI scheme offers 4-6% incentive to eligible firms on incremental sales (over the base year) of manufactured goods for five years. This has attracted interest from nearly two dozen firms, including Foxconn Hon Hai Technology India Mega Development Pvt. Ltd and Samsung India Electronics Pvt. Ltd, to set up production facilities here.

To boost investments, the government last year slashed corporate tax rate for new manufacturers and to businesses not availing of any tax breaks, but a demand slump resulted in a lukewarm response. The government wants to boost manufacturing and is simultaneously pursuing a ₹100 trillion investments into infrastructure over the next few years to steer the economy out of its current slump. The production incentives may help global manufacturing firms exploring a China-plus-one strategy. Also, large production units will mean more business for small and medium enterprises, the backbone of India’s manufacturing and exports sectors.

The decision will give a huge momentum to the manufacturing sector, said Chandrajit Banerjee, director-general of Confederation of Indian Industries.

Malyaban Ghosh contributed to the story.