NEW DELHI – India has announced incentives of nearly $ 1 billion to persuade companies to produce more computers in India, hoping to reduce their trade deficit and attract manufacturers trying to diversify from Chinese production.
India’s cabinet on Wednesday approved a rewards program for companies expanding local production of laptops, tablets and other computers. New Delhi has said it will offer companies cash up to 4% of their sales, depending on how much domestic production grows in the four years starting in April.
“Our focus is to bring the world’s top five world champions to India and produce for the world,” Ravi Shankar Prasad, Minister of Electronics and Information Technology, told a news conference. “Before announcing the incentives, we had discussions with key manufacturers. They’re just waiting. ”
India is positioning itself as a smartphone production hub amid a US-China trade war that has disrupted global supply chains and left technology companies such as Apple and Samsung looking for alternatives in China to manufacture their products. Photo: Olivier Le Hellard for The Wall Street Journal
Indian authorities are already discussing new incentives with Apple Inc.
which has not yet started producing laptops or tablets in India, as well as HP Inc.
which has a presence in India, a government official said.
An Apple India spokesman did not respond to a request for comment. On Wednesday, HP did not respond to an email requesting comments.
The granting of cash is part of Prime Minister Narendra Modi’s broader plans to try to make India self-reliant in terms of electronics, while making it a top global supplier.
India’s economy has been hit harder than most by Covid-19. India’s gross domestic product contracted by more than 15% in the six months to September, making it one of the weakest performances of major economies at the time.
As the number of daily infections decreased, he looked for ways to trigger additional expenses and increases. It has eased restrictions on foreign investment – in insurance companies, for example – and announced tax cuts and other incentives in hopes that local and international companies will spend on more facilities, creating jobs.
New Delhi hopes to use a combination of tariffs and benefits to persuade companies to do more in India. India currently imports more than 80% of laptops and tablets sold in the country, mostly from China, according to a study report by the Indian Cellular and Electronics Association and Ernst & Young.
“Before announcing the incentives, we had talks with key manufacturers,” said Ravi Shankar Prasad, Minister of Electronics and Information Technology. – Just wait.
Photo:
Naveen Sharma / Zuma Press
Its laptop imports have grown by more than 40% in the last five years, to about $ 4.2 billion, as demand for devices has grown with revenue and millions more Indians. Despite growing domestic demand, Indian producers failed to compete with import prices.
New incentives in New Delhi are needed to make the domestic industry competitive, said Pankaj Mohindroo, chairman of ICEA, a lobby group representing India’s electronics sector. With the right government support and infrastructure, India could eventually produce more than 20 percent of the world’s mobile phones, laptops and tablets, he said.
New Delhi hopes that the laptop and tablet industry can follow in the footsteps of the smartphone industry. The smartphone market in India has been dominated by imports, but is now largely produced locally. Imports accounted for 78% of the market in 2014 and are now at 8%, according to Counterpoint Research, a market analysis firm.
The shift to local smartphone production has helped trigger billions of dollars in investment and created jobs such as Samsung Electronics Co.
has set up its largest unit in the world outside Delhi, and Foxconn Technology Group produces state-of-the-art iPhones and other smartphones near the southern city of Chennai.
The government hopes that rising labor costs in China, the geopolitical trade and security environment and the coronavirus outbreak will force global companies to look at alternative destinations such as India to diversify their supply chains.
The new incentive program is expected to generate direct and indirect employment opportunities for nearly 180,000 people and lead to an estimated $ 45 billion in production, of which more than 75 percent will be exported by March 2025, according to a statement. of the IT Ministry on Wednesday.
Even before Covid, India was trying to attract new investment and provide massive labor as an alternative to China.
Some manufacturers were looking for ways to reduce their dependence on China, as growing trade tensions and the Covid-19 crisis made them realize that their supply chains were vulnerable.
“India certainly aspires to be a production center like China,” said ICEA’s Mohindroo.
Write to Rajesh Roy at [email protected]
Corrections and amplifications
An earlier version of this article was misspelled by Ernst & Young. (Corrected on February 24.)
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8