Amid huge reliance on imports for IT hardware including laptops, tablets, all-in-one PCs, and servers, the union cabinet has approved production link incentive for IT hardware products. The total cost of the proposed scheme is pegged to be approximately Rs 7,350 crore over four years.
"PLI for IT Hardware products will be a game-changer for the electronic manufacturing industry. The scheme will help in generating more value add in the country and exports too. We hope to see a strong electronic component chain also developing alongside with the help of these schemes," says Manish Sharma, Chairman, FICCI Electronics and White Goods Manufacturing Committee.
As the scheme proposes a production linked incentive to boost domestic manufacturing and attract large investments in the value chain of IT Hardware, it is likely to benefit five major global players and 10 domestic champions in the above-mentioned hardware categories.
"Government is trying to attract large scale setups in India in an effort to make India as the preferred manufacturing and importantly export hub. To do that, large scale setups are needed which showcases long term commitment, huge financial investment in the country along with other key benefits like giving an impetus to innovation, R&D and employment generation," says Navkender Singh, Research Director, Client Devices & IPDS, IDC India.
According to the details shared by the ministry, the scheme shall extend an incentive of 4 per cent to 2 per cent/1 per cent on net incremental sales (over base year i.e. 2019-20) of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four years. This will enhance the development of the electronics ecosystem in the country and position India as a global hub for Electronics System Design and Manufacturing (ESDM) on account of integration with global value chains, thereby becoming a destination for IT hardware exports.
This scheme is expected to lead to the total production of up to Rs 3.26 lakh crore over the next four years and is also expected to boost exports significantly. Out of the total production in the next four years, more than 75 per cent is expected to be exports to the tune of Rs 2.45 lakh crore. It will bring additional investment in electronics manufacturing to the tune of Rs 2,700 crore. And the direct and indirect revenues generated from production under this scheme are expected to be Rs 15,760 crore over the next four years.
"Over a third of laptop or tablets are locally assembled as compared to 95 per cent in mobile phones. And hence a push is required and PLI is coming at the right time when the global supply chain is looking at various alternatives than depending on one country or nation. It presents India a great opportunity to position itself as an alternative," Tarun Pathak, Associate Director at Counterpoint Research
The government is also estimating production worth Rs 3.26 lakh crore and exports worth Rs 2.45 lakh crore in four years.
While it will encourage local product manufacturing in the PC segment, industry leaders foresee a few challenges too. "At Acer, we believe, the production-linked incentive scheme is a great start and is going to fuel the entire manufacturing ecosystem in India for IT products. However ITA-1 is still a handicap and in future, we hope the government will increase the outlay to enable higher levels of investment in IT manufacturing by both global and domestic IT hardware companies," says Sudhir Goel, Chief Business Officer, Acer India.
The announcement of the scheme gives an impression that localising electronic products in India will not just drive true local value addition but also will lead to more jobs in the country. Given the momentum India has, PLI on more consumer electronic products will drive more players to set up operations in India.