Manufacturing will be key to India’s success. Why do we say this? India has a huge population and a large chunk of them require a job to survive. When we see the growth of China, it’s not because of the digital transformation they are into now. Their growth is because of a solid and robust manufacturing sector. This secondary sector arranged the way for their working population to find jobs and drive the country’s growth.
India has certainly missed the stepping stone of making a robust secondary sector and relied directly on the tertiary sector to support the economy’s growth. Now, the tides are changing. The “Atmanirbhar” mission is on the heads of the national government and they have come out with a scheme which can boost their mobile manufacturing sector altogether.
The Production-Linked Investment Scheme
To make India a global electronics manufacturing hub, the national government has rolled out a ₹41,000 crore Production-Linked Incentive (PLI) scheme.
According to this initiative, a financial incentive of 4%-6% will be given to electronics companies that manufacture mobile phones and other electronic components. 22 companies, including the likes of Wistron, Samsung, Micromax, Foxconn, Lava, etc, have already applied for this incentive program. The shortlisted companies will have to take 2019-’20 as a base year and produce more goods in the next five years. The more incremental sales you generate, the higher the financial incentive you receive.
The total ₹41,000 crore scheme is distributed under the five years. Year 1 – Rs 5,334 crore, Year 2 – Rs 8,064 crore, Year 3 – Rs 8,425 crore, Year 4 – Rs 11,488 crore and Year 5 – Rs 7,640 crore. Any reason for this uptrend? This is done so that the jobs created are for long-term and no company can take benefit by producing more only one year.
“We have introduced the PLI scheme for five years to boost local production. Besides this, we have received commitments to make mobile phone and parts worth Rs 11.5 lakh crore.” – Union Minister for Information Technology and Communications Ravi Shankar Prasad.
The US trade war and then the COVID-19 mystery, both has put Chinese administration under scrutiny in the eyes of the world. All the political and social situations are going to leave a heavy impact on business, and major companies are looking to shift their manufacturing facilities out of China. Resources like land and labour leaves India as the best option for these companies to shift to. The question is, can India make use of opportunity and become the world’s factory?
Why is the government rolling out incentives for manufacturing companies? Creation of jobs. The secondary sector needs a boost. India has a huge labour force (49.42 crore as of 2018). According to estimates, more than 12 lakh people will get employment due to this scheme. Out of this, 3 lakh people will receive direct employment and more than 9 lakh will receive indirect employment.
What will be the long-term impact?
A huge supply of labourers will cut down any manufacturer’s cost of producing their goods. This will help the company drive down prices of their products, and hence attract more customers. Production within Indian boundaries will cut down the cost of imports, thus reducing the import bill. On the other hand, more employment will generate more income for the nation. This will drive the Gross Domestic Product (GDP) of India, higher. Clearly, a win-win situation for all parties involved.