NEW DELHI – India announced nearly $ 1 billion in incentives to persuade companies to make more computers in India, in hopes of closing the trade deficit and attracting manufacturers trying to diversify away from manufacturing in China.
The Indian cabinet on Wednesday approved a rewards program for companies expanding the local production of laptops, tablets and other computers. New Delhi said it would give companies cash equal to up to 4% of the value of their sales, depending on how much they increase domestic production over the four years from April.
“Our focus is to bring the world’s top five world champions to India and produce for the world,” Ravi Shankar Prasad, electronics and information technology minister, told a news conference. “Before we announced the incentives, we had discussions with major manufacturers. They just wait. “
India is positioning itself as a smartphone manufacturing center amid a US-China trade war that has disrupted global supply chains and left technology companies such as Apple and Samsung looking for alternatives to China to manufacture their products. Photo: Olivier Le Hellard for The Wall Street Journal
Indian authorities are already in talks with Apple about the new stimulus measures Inc.
which has yet to start making laptops or tablets in India, as well as HP Inc.
present in India, a government official said.
An Apple India spokesperson did not respond to a request for comment. On Wednesday, HP did not respond to an email asking for comment.
The cash giveaway is part of Prime Minister Narendra Modi’s broader plans to try to make India self-reliant in electronic goods while making it a top global supplier.
The Indian economy has been hit harder than most other countries by Covid-19. India’s gross domestic product contracted more than 15% in the six months to September, making it one of the worst performing major economies during that period.
As the number of daily infections has fallen, it has started looking for ways to stimulate further spending and growth. It has relaxed restrictions on some foreign investment – in insurance companies, for example – and announced tax breaks and other incentives in the hope that local and international businesses will spend on more facilities, creating jobs.
New Delhi hopes to use a combination of rates and benefits to convince companies to earn more in India. Currently, India imports more than 80% of the laptops and tablets sold in the country, most of them from China, according to a research report from the Indian Cellular and Electronics Association and Ernst & Young.
“Before announcing the incentives, we had discussions with key manufacturers,” said Ravi Shankar Prasad, electronics and information technology minister. “They just wait.”
Photo:
Naveen Sharma / Zuma Press
Laptop imports are up more than 40% in the last five years to about $ 4.2 billion as demand for the devices has grown with incomes and millions of Indians going online. Despite growing domestic demand, Indian manufacturers have not been able to compete on price with imports.
New Delhi’s new incentives are needed to make the domestic industry competitive, said Pankaj Mohindroo, chairman of the ICEA, a lobby group representing the electronics sector in India. With the right government support and infrastructure, India could eventually produce more than 20% of the world’s cell phones, laptops and tablets, he said.
New Delhi hopes the laptop and tablet industry can follow in the footsteps of the smartphone industry. The smartphone market in India was 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 company.
The shift to local smartphone production has generated billions of dollars in investment and created jobs, such as Samsung Electronics, for example Co.
has set up its largest facility in the world outside of Delhi and Foxconn Technology Group makes iPhones and other high-end 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 international companies to look to alternative destinations such as India to diversify their supply chains.
The new incentive program is expected to generate direct and indirect employment for nearly 180,000 people and lead to production worth $ 45 billion, more than 75% of which will be exported by March 2025, according to an IT ministry statement Wednesday.
Even before Covid, India was trying to attract new investment and offer its huge workforce as an alternative to China.
Some manufacturers have been looking for ways to reduce their dependence on China, as growing trade tensions and the Covid-19 crisis have made them realize their supply chains were fragile.
“India is definitely striving to be a manufacturing hub like China,” said Mr. Mohindroo from ICEA.
Write to Rajesh Roy at [email protected]
Corrections and reinforcements
An earlier version of this article misspelled Ernst & Young. (Corrected on Feb. 24.)
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