Production incentives for more sectors; tariff protection temporary: NITI Aayog

NEW DELHI: The Centre will offer manufacturing incentives to more sectors while tariff protection offered to encourage domestic producers competing with imports is only a temporary measure, Rajiv Kumar, vice chairman of federal policy think tank NITI Aayog, said on Friday.

Addressing concerns of nations adopting protectionism as they nurse the deep wounds left by the pandemic, Kumar said steps taken to revive the economy will respect international rules.,

“If any support is given to domestic enterprises, it will all be targeted towards getting globally competitive capacities and any support given to them through tariffs would have an in-built sunset clause. I want to emphasise on India’s commitment to an open order and a global economy,” said Kumar.

Policy makers are focusing on improving self-sufficiency in many areas. This is being done while the Indian economy stays open and respects a “rule bound multilateral order” and it does not imply in any sense any form of isolation, closed economy or protectionism, said Kumar.

He was speaking at a virtual conference on ‘Achieving sustainable growth in a turbulent and disruptive global market’ organised by the Confederation of Asia-Pacific Chambers of Commerce and Industry (CACCI) and the Federation of Indian Chambers of Commerce & Industry (FICCI).

Mint had reported on 19 October that basic customs duty on import of select electronic items, such as mobile handsets, television sets, and ancillary components, may be lifted after some time, as the duty is meant only as a temporary protection for local producers in the early stages of their capacity building.

The government is looking at the feasibility of introducing end dates for the higher import tariff on these items, said a government official had told Mint, seeking anonymity.

Kumar added that the government wanted to provide domestic manufacturers with the best of opportunities. While the country seeks foreign direct investment, it has also reposed trust in those who have already invested.

"We want to recognise them by giving them much better logistics, infrastructure and flexibility in use of land and labour. It is for this reason, we have brought out the ‘production linked incentives (PLI) scheme,’ which will be valid for nine or ten sectors soon, for four of which, the cabinet decision is already taken,” Kumar said.

The idea, he said, is to incentivise investors to put up globally comparable capacities in scale and competitiveness.

The PLI scheme offers 4%-6% incentive to eligible electronic companies on incremental sales (over base year) of manufactured goods—mobile phones and electronic components such as printed circuit boards, sensors, among others-- for a period of five years. Over the next five years, the scheme is expected to lead to a total production worth ₹11.5 trillion, of which more than 60% will come from exports.