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Quest to Be the World's Factory

With total incentives committed going as high as Rs 1.99 lakh crore over five years, PLIs now rival some of the biggest Government of India outlays such as Rs 3.05 lakh crore for reforms-based result-linked power distribution sector scheme and the Rs 1.4
twitter-logoRajeev Dubey | Print Edition: May 2, 2021
Quest to Be the World's Factory
Rajeev Dubey, Editor, Business Today

The Production Linked Incentive (PLI) Scheme - India's valiant answer to domestic and foreign manufacturers' eternal gripe that producing in India was hopelessly unviable because of high taxes, high cost of logistics, finance, land, power and an endless list thereafter - was introduced for mobile manufacturers in 2020.

The Government of India's commitment to provide cash incentives up to 4-6 per cent of revenue from incremental local manufacturing aimed at import substitution got such an excitable response from companies that the Centre made mobile PLI the template to launch it in 12 other sectors. With total incentives committed going as high as Rs 1.99 lakh crore over five years, PLIs now rival some of the biggest Government of India outlays such as Rs 3.05 lakh crore for reforms-based result-linked power distribution sector scheme and the Rs 1.4 lakh-crore Swachh Bharat Mission (Urban).

Despite its obvious advantages of import substitution - saving precious forex - PLI will still have to deliver projects on the ground to be considered a success. Early birds in mobile manufacturing such as Samsung, Apple's contractors and Lava have committed investments worth Rs 11,000 crore. But surprisingly no one has yet made an incentive disbursement claim. How this plays out in other sectors will be the true litmus test of PLI. In this issue's cover story, Joe C.Mathew and Nidhi Singal examine India's quest to be the world's factory. What works! What doesn't!

From one bright spark to another. Right through the Covid onslaught in 2020, India's IT firms remained the cynosure of all eyes for their contrarian growth among shrinking economies at home and abroad. NASSCOM expects Indian IT services segment to grow 2.7 per cent year-on-year to reach $99 billion in 2020/21, when India's GDP is set to shrink 8 per cent. Rukmini Rao takes you through Indian IT firms' innovations drive right through the pandemic. The most notable of those being reskilling of employees. Large firms such as TCS, Infosys and Wipro, among others, embarked on a massive reskilling drive to prepare the workforce for a pandemic-ridden world. TCS alone trained 366,000 employees in new technologies, and over 444,000 in Agile methodologies (software development methodologies focused on collaboration between cross-functional teams).

Meanwhile, with new foreign investment opportunities opening up, the ever-hungry, ever-innovative Indian investors have got hooked on to Special Purpose Acquisition Companies. SPACs, also called blank cheque companies, are listed in the US with the objective of acquiring private firms. They are allowed up to two years to acquire and merge a company. Investors holding equity in SPACs get an equivalent stake in the acquired firms. SPACs are the fastest and most convenient way to list a company without going through the prolonged IPO route. Investors have caught on to the trend with SPACs accounting for up to 5 per cent of AUM on global investment platforms. India's renewable energy player ReNew Power recently signed an agreement with the US-listed SPAC RMG Acquisition Corporation II to list on Nasdaq at a valuation of $8 billion. Flipkart and Grofers are also looking to go public via this route. India doesn't allow SPACs just yet, but Sebi has set up a committee to discuss introducing the option for Indian investors as well. Aprajita Sharma catches the Indian investor frenzy around SPACs.

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