Over two dozen companies pledge US$ 1.5 billion to set up mobile-phone factories in India
- IBEF
- August 17, 2020
Companies from Samsung Electronics Co. to Apple Inc.’s assembly partners have shown interest in investing in the South Asian nation.
In March 2020, Prime Minister Narendra Modi’s government announced incentives that make niche firms -- electronics manufacturers -- eligible for a payment of 4 per cent-6 per cent of their incremental sales over the next five years. This has resulted in attracted an investment of US$ 1.5 billion from about two dozen companies in order to set up mobile-phone factories in the country.
The companies that have shown interest includes Samsung, Hon Hai Precision Industry Co., known as Foxconn, Wistron Corp. and Pegatron Corp. The government have further implemented the same incentives model to pharmaceutical businesses, and intends to cover more sectors, which may include automobiles, textiles, and food processing under the program.
The companies were opting to shift their base amid the U.S.-China trade tensions and the coronavirus outbreak, though it hasn’t yet translated into big gains for India despite the nation making it cheaper for businesses to open shop. The most favoured destination by companies is Vietnam, followed by Cambodia, Myanmar, Bangladesh, and Thailand, according to a recent survey by Standard Chartered Plc.
“There is a reasonable chance for India to gain in terms of incremental investment of supply chains within the country over the medium term,” said Mr Kaushik Das, chief India economist at Deutsche Bank AG in Mumbai. “These programs are aimed at increasing India’s manufacturing share in the gross domestic product.”
It is estimated that the program for electronics alone could generate US$ 153 billion worth of manufactured goods over the next five years and create about one million jobs directly and indirectly.
According to analysts led by Neelkanth Mishra at Credit Suisse Group AG, it will bring an additional investment of US$ 55 billion over five years, adding 0.5 per cent to India’s economic output. Thus, shifting an additional 10 per cent of global smart-phone production to India in five years, most of it from China.
This is in line with the Modi’s goal to increase the share of manufacturing in the economy to 25 per cent from the current around 15 per cent as part of his ‘Make in India’ program. In order to attract investments, the Government has lowered taxes on companies to among the lowest in Asia.
The latest output-linked incentive plan is a “big win for Make in India,” Mr Amish Shah, an analyst at BofA Securities, said in a report to clients. He sees gains for industrials, cement, pharmaceuticals, metals, and logistics, with long-term indirect benefits across many sectors.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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