This article is written by Shreya Tandon, from Vivekananda Institute of Professional Studies (VIPS), IP University. In this article, the author talks about the pragmatic initiatives taken by the Government of India to curb the situation of a worldwide pandemic and measures taken to attract big shot foreign manufacturers to invest in India.
Table of Contents
Introduction
India is known for its potential market, tech-savvy youth, and splendid expertise for inventions globally. As to encourage and improve the manufacturing sector that focuses on increasing exports and discouraging imports, various measures have been adapted, one such being ‘Make In India.’ This policy was first heard on 15th August 2014 by Prime Minister Narendra Modi in his Independence Day’s speech which focused on increasing the manufacturing rate and contribution to the country’s GDP and also aimed at providing employment to people.
15th August 2014: PM Modi while addressing the nation at large states that “the economy is changing rapidly and there is a need to enhance and pay attention to the manufacturing sector of the country in order to compete and grow with other nations. While motivating the IT and manufacturing sector, he says India is surely capable of spreading its roots in multiple spheres for the manufacturing of – chemicals, pharmaceuticals, automobiles, war weapons, satellites in its homeland itself and there is no need to be dependent for the same on other countries. While inviting the other countries to invest and manufacture in India he makes them aware of the talent, discipline, resources, and working force that India possesses which can provide a helping hand to all the territories in the future.”
This measure again gained momentum in 2020 after the COVID-19 pandemic severely affected the global economy. It was then, the need of decreasing imports was felt again when the relations got strained with the other countries. The government of India has now set its goal high to bring its economy on track and is rigorously working to play its cards right by introducing and offering various incentive schemes to grasp the attention of foreign investors.
The new ‘Jeevan Mantra’: Make In India 2.0
After almost five years of the making of the policy, the results were moderate as it seemed that there was too much dependence on foreign capital for investment and there was a lack of implementation of the scheme. India ended up being an assembly hub for industries such as mobile phones, lighting, and consumer electronics. In other words, manufacturers assembled products from imported electronic components to meet domestic demand.
The dire emergency to raise this issue again was felt in mid-June when the situation of war emerged between India and China, which resulted in the death of twenty Indian soldiers. Recent events surrounding China’s aggressive political and business tactics coupled with its rather poor handling of the containment of the coronavirus spread have made global economies wary of the country, propelling them to look for alternate avenues of business and trade. India took a splendid step by banning Chinese apps which resulted in the downfall of China’s economy. ‘Make In India 2.0’ seeks to protect the domestic manufacturers and push them up the value chain.
Modi in his speech on 12th May 2020 stated that now it’s high time to broaden our vision for ‘Atma Nirbhar Bharat’ and ensured in providing opportunities that will give a direction to the tech community and the manufacturers.
Top three schemes launched by the Government of India
The Government of India has also set in motion three schemes which are likely to press the accelerator on vertical integration, where the component supply-chains are coerced to be local because of import substitution. The schemes are as followed-
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2020 Schemes |
Aim |
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It focuses on large scale mobile manufacturing |
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It takes hold of the domestic electronic supply chain of components |
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Infrastructure and common facilities for large manufacturers and value chain companies |
Production-linked incentive scheme (PLI)
- Both India and China grew rapidly after liberalization in the 1980s. However, there exists a sort of paradoxical situation in its industrial development and China’s economy is considered better than India’s. Though both the countries began together, at this point China is recognized as one of the leading markets of electronics in the whole world. In 2019, China sold electronics worth Rupees 1.4 Lakh Crores to India. But now in 2020, tables have turned and India is at the state of war with China.
- India is considered to be one of the fastest-growing economies of the world and with growth comes the need for the development in manufacturing of electronic goods in its home country.
- The industry body India Electronics and Semiconductor Association (IESA), works toward the development of a vibrant Indian Electronics System Design & Manufacturing (ESDM) ecosystem, evangelizing the dream of ‘Make in India’ into a reality.
- By the time we reach 2025, the demand for domestic electronics is expected to rise to USD 400 Billion and India cannot afford to bear the rapidly increasing foreign-exchange outgo on account of import of electronics.
- If we go back to the history of international trade(10th-18th century), there is a very popular theory by economist Adam Smith called ‘Mercantilism’ which talks about a self-reliant and self-sufficient economy. It states that, for the state to be self-sufficient, it has to increase its domestic production and build new homes for industries. The country should focus on trade-surplus, that is the value of exports should be greater than the value of imports, and the situation of trade- deficit is to be avoided.
- This policy of the government aims at encouraging exports and discouraging imports for the betterment of the nation’s wealth thus, achieving a surplus in the balance of payment.
- National strength can only be maximized by limiting imports by means of tariff barriers and quotas.
Aim of the scheme
The Production-linked incentive scheme(PLI) for large scale electronic manufacturing proposes-
- Providing financial incentives to boost domestic manufacturing.
- Bring large scale manufacturing into action.
- Development of a supply chain ecosystem in electronics by attracting large foreign investors.
- Improving manufacturing environment by building new manufacturing clusters in the country.
- PLI up to INR 40,195 crores will be awarded over a period of 5years.
Target area
The guidelines revolve around three segments-
- Mobile phones
- Specified electronic components
- SMT components.
- Discrete semiconductor devices that encompass- thyristors, diodes, and transistors.
- Passive components such as- capacitors, resistors and so on for electronic applications
- Printed Circuit Boards(PCB), prepregs, PCB printing inks, PCB laminators and photopolymer films.
- Lastly, micro or nanoelectronic components.
- Assembly, Testing, Marketing and Packaging(ATMP) units
Eligibility criteria
- The companies which are engaged in the manufacturing of the target segment of India can claim benefit under this scheme.
- Eligibility shall be subjected to a threshold of incremental investment and incremental sale of manufactured goods.
- A company will not be deprived of eligibility of incentive under PLI if it is a part of another scheme too. In other words, it can claim the benefit of incentives under both schemes.
Percentage of incentive
- As decided by the Empowered Committee, the incentive up to 4-6% on incremental sales(over a base year) would be provided to companies for the manufacturing of goods in India.
Scheme for Promotion of Manufacturing of Components and Semiconductors (SPECS)
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The guidelines under Scheme for Promotion of Manufacturing of Components and Semiconductors aim to strengthen the domestic electronic supply chain of components.
- Incentives up to INR 3,285 crores will be rewarded under the scheme over a period of 8 years.
Eligibility criteria
- The scheme shall be applicable for investments made in new units, expansion of capacity, and diversification of existing units by any legal entity registered in India.
Tenure of the scheme
- The SPECS will be open for applications for 3 years from its date from the notification that is 1st April 2020.
Incentives and threshold limit
- Minimum investment varies from 5 crores to 1,000 crores depending upon the category of product to be manufactured.
- Incentives under the scheme are 25% of the eligible capital expenditure for an approved application under the scheme.
Electronics Manufacturing Cluster Scheme (EMC2.0)
The guidelines under The Modified Electronics Manufacturing Clusters (EMC 2.0) scheme seeks to strengthen the infrastructure base for the electronics industry and deepen the electronics value chain in India. The development of industry-specific facilities like common facility centres, ready-built factory, sheds/plug, and play facilities will not only strengthen supply chain responsiveness and promote the consolidation of suppliers but also decrease time-to-market and lower logistics costs. EMC 2.0, therefore, provides financial incentives for creating quality infrastructure as well as common facilities and amenities for electronics manufacturers. Financial incentives of up to INR 3,762 Crore will be disbursed over a period of 8 years.
Leading continuous outcomes of the new government schemes in combination with Modi led ‘Make In India’
The Government of India during COVID has made way for the schemes to induce global investors and manufacturers from all over the world who are looking for a substitute for China. In the meeting with the Union Minister(Home Affair) Amit Shah, Nirmala Sitharaman(Finance Minister), Piyush Goyal(Minister of Railways and commerce) along with the other senior ministers, it was decided that schemes should be such that promote infrastructure, industrial land, and resources that entice the manufacturers to put their money in India. Proactive actions must be taken to draw the Foreign Direct Investment for making Indian destinations attractive. This move by the Government of India has surely dropped a bombshell on China and now it’s time to watch as they stop dead in their tracks.
Merger and Acquisition(M&A) has emerged as the best tool for both the Indian as well as the International companies who want to be a part of the Indian economy by the initiatives raised for the promotion of local manufacturing. The ongoing outcomes of the scheme are popping up on the news channels day and night and can be seen as follows:
- The ‘i’ in the iPhone 11 will now stand for India- made. The iPhone is the largest smartphone market and is recognized as a symbol of globalization. The stick and carrot policy led by the Modi government persuaded Apple thus, it chose to invest in India. It not only saved it’s 22% import duty but the government’s 50,000 incentive scheme acted as an eye-candy for such huge high-tech manufacturers to finance in India. The plant that will manufacture Apple’s phone is set near Chennai with the help of iPhone’s contract manufacturer Foxconn. These investors bring more credibility to the Indian market that will not only help Apple stores to make the bulk of money but will also simultaneously enhance India’s economy by providing employment to many that will help make their living conditions better.
- Measures for the expansion of the Palm Oil industry to support the Atma Nirbhar Bharat initiative have begun. Globally 197 million tonnes of oil are traded out of which 15 million tonnes are imported to India to mark its needs. Measures will be possibly made to manufacture edible oils in the homeland to put a hold on imports. Oil- cultivation is now to be taken in a big way. Currently, the country has only about 3.3 lakh hectares under oil palm, while the potential identified for it is 19.3 lakh hectares in the states of Andhra Pradesh, Arunachal Pradesh, Assam, Chhattisgarh, Karnataka, Kerala, Mizoram, Odisha, Tamil Nadu, and the other North-Eastern States.
- Top Six world-famous electronics equipment manufacturers such as Samsung, LG, Apple, Singapore- based Flexatonic also known as Flex, and Pegatron are eyeing to invest in India through the PLI scheme. They are on the verge of completion of the final deal and have already roughly set the budget of pumping in 1 Billion each to the Indian markets.
- India can be seen as the number one country that works for humanity at the global level. The innovation, designing, and creativity of Indian scientists, technicians, and engineers are visible to the whole world after the valuable contribution to The International Thermonuclear Experimental Reactor (ITER) project which aims at replicating the energy of the sun. The ITER project was signed by India in 2005 and by the next year, the ITER Agreement was made between the partners. Its partners include China, Japan, South Korea, Russia, and the European Union which constituted 45% of the stake in contributions being the host. India has also contributed to the development of cryogenic and water cooling systems.
- After India banned 59 applications from China due to privacy issues it started to gear up by introducing the substitutes for banned Chinese apps. For example,
- ShareIt is substituted with ShareAll
- Zoom alternatives: Jio meet
- Cam Scanner alternative: Adobe Scan
- WPS Office with Google Drive
- TikTok with ShareChat
- UC Browser is substituted by Epic Web Browser
- Viva Video alternative: Photo video maker with music
- A new e-commerce project is set to launch by the Reliance group led by the sixth richest man of the world, Mukesh Ambani. It will empower 1.2 million of the population. It is a new business model that will help small merchants to operate online. Along with this comes another biggest news, Reliance Jio sells its 32.94% of stake to 13 biggest investors to get rid of the debt. Some of the investors are-
- VISTA
- Silver Lake
- General Atlantic
- Vivo itself being a Chinese technology company that is owned by BBK Electronics is planning to set up a new manufacturing plant in Uttar Pradesh by investing 40 billion over a period of four years. The new plant will offer benefits to the surrounding area and to the people by providing approximately 5000 job opportunities.
Consumer Protection (E-Commerce) Rules, 2020
With the changing dynamics of the market, e-commerce has emerged as a new trend. These rules are consumer-centric which work for the interest of people who use online platforms in their daily lives. It lays down the duties of e-commerce entities.
- The Government of India issued new guidelines for e-commerce platforms making the retailers explicitly liable and accountable for their online business. It helps in maintaining transparency.
- The Central Consumer Protection Authority(CCPA) has been set up and given the power of holding the retailers liable if they do not abide by the rules stated. They’ll be booked under the law if they charge a price higher than the reasonable one and are found to make ‘Extra Profit’ from consumers. This authority also takes into account the illegal trade practices happening over the internet, misleading advertisements, and takes care of the consumer’s rights.
- Under the Consumer Protection (E-Commerce) Rules, 2020 the e-tailors are under an obligation to keep a record of whole data regarding the amount of refund, a number of returns and exchanges, warranty and guarantee, clarity of delivery and shipment procedure, mode of payment and lastly e-tailers should be customer friendly and have a mechanism to attend the grievances of their consumers.
- E-commerce platforms from now on cannot charge the cancellation fee from the customers unless they themselves have to bear the same if the customer cancels the order.
- The rules cover marketplaces working as aggregators such as Amazon and Flipkart and inventory-led models where the retailer owns the stocks.
Conclusion
From the beginning of the ‘Make in India’ campaign to realizing the importance of self-reliance in recent times, India has indeed come a long way. Though the global pandemic has brought unforeseen circumstances and has halted various businesses across the globe, India seems to be taking full advantage of this situation by implementing the words of its Prime Minister “Aapda ko Avsar banana hai” meaning, it’s time to convert disasters into opportunities and moving towards new highs. The PM Narendra Modi asks the public to ponder upon certain questions such as- Is it possible to make games of Indian origin popular through apps? Can applications be invented for the betterment of people in rehabilitation centres or under psychological distress who are seeking counselling? There are many answers to the questions which can be solved by the new upcoming technologies. He is further of the opinion that the outcome of the COVID crises for India should be such that it should provide clarity to the existing app makers and IT cells to reach their full potential and goals by proper mentorship and guidance for future establishments.
The appropriate policy changes, the introduction of new schemes to induce foreign producers, encouragement of domestic production by the government blended with the proper commitment of the people can pave the way for India to become the hub of production, which will not only make it self reliant but will also provide employment opportunities and will help the country in growing and developing at an exponential rate.
References
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