FACTORY TO THE WORLD?
âš199,641 Crore
TOTAL INCENTIVE OFFERED FOR FIVE YEARS
$520 Billion
PROJECTED RISE IN DOMESTIC PRODUCTION OVER FIVE YEARS
1.9 Million
PROJECTED JOB CREATION OVER FIVE YEARS
On March 10, the $274 billion, Cupertino, California-based Apple Inc. announced it is starting production of the 5G-compatible iPhone 12 in India. It appeared like a routine announcement. After all, Apple has been assembling older generation iPhones in India through contract manufacturers since 2017. It wasnât.
It might have been a small step for Apple but was a giant leap for Indian manufacturing. Indiaâs new Production Linked Incentive (PLI) Scheme to reduce import dependence and promote local manufacturing had lured three of Appleâs Taiwanese original equipment manufacturers â Foxconnn Hon Hai, Wistron and Pegatron â to pump in millions of dollars to expand Indian facilities. They will move a step up from assembling imported parts here to making or sourcing more components locally. Like Apple, about 70 firms have shown interest in availing the PLI Scheme to set up manufacturing facilities in three key sectors: mobile and electronic components; pharma-APIs (active pharmaceutical ingredients); KSM (key starting materials) and medical devices.
By December 2020, the applicant mobile and electronics makers had invested âš1,300 crore, producing goods worth âš35,000 crore, creating 22,000 additional jobs. The Centre was so enthused by the response of companies such as Apple to the Large Scale Electronics Manufacturing Scheme that it made mobile PLI the template for extending the scheme to 12 other sectors covering hundreds of diverse products such as air-conditioners, printed circuit boards, solar photovoltaic cells and LED lights. For companies willing to expand or set up plants in the 13 sectors, the scheme offers a massive incentive of âš1,99,641 crore ($26.6 billion) over the next five years to substitute imports, augment domestic production, increase exports and build a manufacturing ecosystem that could provide jobs to about 1.9 million people over the five years. If successful, it could put India on the path to be a $5 trillion economy.
The scheme was launched as part of the Covid-19 economic stimulus. It covers auto and auto components, telecom, pharma, medical devices, IT hardware, food products, textiles, steel, air conditioners, Advance Cell Chemistry (ACC) batteries, mobile and electronic components, pharma API and medical devices. A CRISIL research report says the PLI Scheme â directed at sectors that account for 30-35 per cent of Indiaâs non-oil import bill â can lead to âš2-2.7 lakh crore capital expenditure over two to three years and generate âš35-40 lakh crore revenue during its entire period.
Can the enthusiasm of mobile phone makers be repeated in other segments? Can a purely demand-driven scheme (incentive is linked to incremental production and production is linked to demand) make a difference when demand and growth continue to lag in a pandemic-hit world?
But even as companies approach the PLI Scheme with excitement and cautious optimism, there are several unanswered questions. First, will such interest translate into projects on ground? After all, the base year for mobile phone PLI was 2019/20, implying the first incentive tranche was due in 2020/21. But no company has
