The latest instalment of production linked incentives offered by India to lure global manufacturers is simply the next step in a long line of reforms and policies taken by the Modi government to send out a clear message to the world - India means business.
'Need to Make in India to make for the world' was the rallying cry made by PM Modi, on India's 73rd Independence Day. Standing at the Red Fort, the Indian Prime Minister laid out the blueprint for India's economic recovery from the pandemic - Self Reliance. “For how long will the country export raw materials and then import finished products I admit that there are challenges towards making India a self-reliant nation, but 130 crore Indians can rise up to meet these challenges.”
Have you read
This path to self-reliance was first paved during Modi's speech when India first began its struggle under the impact of the coronavirus crisis. Since then, the Modi government has been quick to implement the initiative for self-reliance by introducing a slew of reforms that cut through red tape, simplified access to land and labour, opened up blockages across sectors ranging from mining to space and opening the doors wide for investment, both domestic and international.
“We are laying a red carpet for all global companies to come and establish their presence in India. Very few countries will offer the kind of opportunities India does today,” announced the Prime Minister during his inaugural speech at India Global Week 2020. The latest $23 billion package to lure global manufacturers simply proves that it's not just all talk - India means serious business.
According to Bloomberg, the Modi government will be offering production linked incentives to automobile manufacturers, solar panel makers, and steel to consumer appliance companies, with textile units, food processing plants and specialised pharmaceutical producers also under consideration for inclusion. The scheme is part of wider impetus by the Indian government to attract businesses away from China and make India a global manufacturing hub. The government also plans to introduce a phased manufacturing program for other sectors to allow companies to gradually increase local value-addition.
In April this year, the Modi government notified the Production Linked Incentive (PLI) scheme for Large Scale Electronics Manufacturing to attract smartphone manufacturers to set up assembly and manufacturing operations in India. The move was seen as a first step in not only attracting large scale investment into the manufacturing sector but also as a template in testing to roll out across other sectors. The PIL was quick to get attention from tech giants like Samsung and Foxconn (Apple manufacturer) Wistron, Pegatron amongst others, who set up manufacturing bases to India, along with an investment of $1.5 billion.
The coronavirus pandemic which continues to sweep through the world, has also delivered a heavy blow to India's growing economy. Data released by the National Statistical Office (NSO) on Monday showed GDP in the April-June quarter of 2020-21 slumped 23.9 per cent compared with growth of 3.1 per cent in the previous (January-March) quarter. This in addition to the border dispute with China has only spurred India onto to the goal for self-reliance that it has set for itself. Yet, it can be argued that the path to growth and a 1 trillion economy was being paved much before the pandemic hit. In September last year, Finance Minister, Nirmala Sitharaman, slashed corporate tax rates in India to 25.17 percent from the previous 34 per cent and to 15 per cent from 25 per cent for new manufacturing companies. A move that made Indian corporate tax rates one of the lowest in the world, bringing the country on par with other global manufacturing hubs such as Malaysia, Indonesia, Myanmar, Brazil and even China.
Then the Insolvency and Bankruptcy Code (IBC) introduced in has been somewhat successful in alleviating the stress of India's banking sector and go a long way in enabling the resolution of stressed loans within a given time frame and putting the assets back into production in the shortest possible time. India has also made leapfrogged on the Ease of Doing Business ranking, to 63rd rank from its former position at 77.
Still more to read:
The Modi government's determination and the speed at churning out reforms to propel India back on its growth trajectory seems to be bearing fruit. The country received $20 billion in investment in this year. Despite the temporary setback, experts foresee the Indian economy making a sharp recovery and if the recent spate of FDI coming into India is anything to go by, it is clear that investors too remain optimistic. The road ahead of course is far from smooth. India still has some way to go before it gains a competitive edge of established manufacturing hubs such Vietnam, Cambodia, Thailand, Myanmar and Bangladesh. The speed and implementation of reforms laid out by the current Indian government, the global surge to diversify supply and manufacturing chains from out of China and the opportunities for growth and partnership based on trust and reliance that India offers - all signify that the light at the end of the pandemic tunnel is shining bright for India, indeed.