India’s manufacturing boosts gain amid efforts to cut Chinese imports

India’s financial incentives to boost domestic manufacturing have attracted over $17 billion (about Rs 1,422.79 crore) in investments since the launch of the production-linked scheme in 2020, a government official said on Wednesday, amid efforts to cut imports from China.

The scheme, which offers manufacturers a cash rebate of four to six percent on additional sales, was launched across 14 sectors including electronics, pharmaceuticals, textiles and home appliances.

“The PLI scheme has proven successful in attracting investments and boosting manufacturing,” said Amardeep Singh Bhatia, secretary, Ministry of Promotion of Industry and Internal Trade.

India has emerged as a global hub for manufacturing of electronics, especially smartphones, and is now the second-largest producer of mobile phones, he said, referring to Apple’s iPhone exports — which stood at over $12 billion (approximately Rs 1,00,437 crore) in fiscal year 2023/24 ending March.

The incentives have resulted in output worth about 11 trillion rupees ($131.6 billion) and nearly a million jobs in four years, he said.

After reducing imports of mobile phones from China by attracting international players like Apple, India is now planning to produce more laptops, tablets, computers and servers, official sources said.

The government on Tuesday extended the ‘import management system’ introduced in November 2023 by three months. This system requires companies to register their imports of laptops and tablets.

“We have informed the industry that we want to restrict imports, particularly from China,” one of the government sources said.

According to consulting firm Mordor Intelligence, the IT hardware market in India, including laptops, is estimated to be worth nearly $20 billion (approximately Rs 1,67,395 crore), with domestic production of nearly $5 billion (approximately Rs 41,848 crore).

India announced the new system for laptops, tablets, PCs and servers after it reversed an earlier plan to impose a licensing system that required companies like Apple, Dell and HP to obtain licenses for imported laptops and tablets.

In the first phase, the government has approved incentives for 27 IT hardware manufacturers, including Acer, Dell, HP and Lenovo, to manufacture in India. The expected production is around $42 billion (approximately Rs 3,51,530 crore) in the coming years, government officials said.

“India has a strong case to build its own laptop manufacturing capacity,” said Ajay Srivastava, founder of Global Trade Research Initiative (GTRI), a Delhi-based think tank. He noted that China has contributed significantly to these imports, worth over $9 billion by 2023/24.

In India, rising incomes, growing business activities and educational institutions have led to increased demand for laptops and other devices that need to be manufactured locally.

Among local electronics makers, Dixon Technologies has qualified for the incentive scheme and hopes to meet 15 percent of India’s domestic demand by fiscal 2025/26. “Dixon plans to create a capacity of two million units by FY26, which will meet 15 percent of India’s total requirement,” Prithvi Vachani, executive director at Dixon Technologies, told Reuters. Dixon, which has separate agreements with global companies such as HP to make laptops and computers in India, will secure local manufacturing components “going forward”, Vachani added.

© Thomson Reuters 2024

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