India is planning to ramp up incentives for the local manufacture of mobile phones through the introduction of a number of electronics manufacturing schemes.
Telecommunications and IT minister Ravi Shankar Prasad recently unveiled the guidelines for the three schemes: the Production-Linked Incentive Scheme (PLI), the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and the Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme. The schemes will be backed with an estimated expenditure of around $6.6 billion.
The PLI scheme involves an incentive of four to six per cent on incremental sales of specified goods manufactured in India by eligible companies over a five-year period. The SPECS offers an incentive of 25 percent on capital expenditure for a number of electronic goods, notably components, semiconductor/ display fabrication units, and assembly, test, marking and packaging (ATMP) units. The aim of EMC 2.0 is to support the creation of world-class infrastructure.
Production of mobile handsets is certainly rising in the country. One estimate suggests 290 million units in 2018-19, making India the world’s second-largest manufacturer of mobile phones, but the government clearly wants to build on this.
Will this benefit the mobile manufacturing industry and lead to companies moving their supply chains to India, as some very enthusiastic industry associations hope? There has certainly been strong speculation in the Indian press that one effect of the PLI scheme in particular could be to encourage major smartphone manufacturing names like Foxconn, Wistron, Flex, Samsung, Oppo and Vivo to establish a wide manufacturing base in the country.
There’s even been a clamour for the PLI scheme in particular to be extended to many other electronics sectors. But until all three schemes have been rolled out, their likely effectiveness will be hard to judge.