India Extends $20 Billion Package After Luring iPhone Makers
Cabinet approves Production-Linked Incentives worth Rs 2 lakh crore for 10 sectors.
(Bloomberg) -- India approved an incentive program worth 1.46 trillion rupees ($20 billion) to attract companies to set up manufacturing in the South Asian nation, Finance Minister Nirmala Sitharaman said.
The government will offer production-linked incentives to 10 sectors including automobile, solar panel and specialty-steel makers over a five-year period, she said after a meeting of a ministerial panel on Wednesday. Textile units, food processing plants and specialized pharmaceutical product makers are also eligible for the incentives.
“This is something that will immediately give greater impetus to manufacturing,” Sitharaman said. The plan will help India become a global manufacturing hub, she added.
The incentive program, mooted by the country’s policy planning body Niti Aayog, uses the template of a program implemented earlier this year to draw businesses away from China. Companies including Samsung Electronics Co. and iPhone manufacturers Hon Hai Precision Industry Co. and Wistron Corp. pledged $1.5 billion to set up mobile-phone plants after India offered to pay them an amount equivalent to 4%-6% of their incremental sales over the next five years.
Attracting investments is key for Prime Minister Narendra Modi’s government to revive an economy headed for its deepest annual contraction this financial year. His government has already cut corporate taxes to among the lowest in Asia, overhauled insolvency rules and eased foreign direct investment norms to improve the ease of doing business.
Modi set a goal to grow the share of manufacturing in the economy to 25% from about 16% currently as part of the so-called ‘Make in India’ program.
Economists see the latest measures having a positive impact in the medium term, while giving a fillip to jobs creation.
“Achieving share of manufacturing to 25% of economy is certainly imperative to increasing employment opportunities,” said N.R. Bhanumurthy, vice chancellor of Bengaluru Dr. B.R. Ambedkar School of Economics University.
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Watch | Finance Minister Nirmala Sitharaman outlines the fineprint of the PLI scheme: