News & Analysis

India to Fastrack Manufacturing Investments

The opportunity came calling when Chinese plants shut down post-Covid affecting supply chain operations causing product prices to rise

The government has set its sights on further enhancing India’s manufacturing heft in the global markets by fast-tracking permissions and helping investors to expand capacities under several production-linked incentive schemes. The move is the outcome of the earlier efforts in this direction that resulted in companies such as Apple adding India to its manufacturing base. 

Decisions in this regard are a result of discussions amongst officials of the finance ministry, the department of promotion of industry and internal trade and Niti Aayog. The meetings reviewed investments from such schemes, which overshot the Rs.25,000 crore target set for March. However, there was a view that outcomes were skewed in favor of some industries only. 


Govt plans to streamline and handhold

A report published by ET quoted unnamed officials to suggest that this hasn’t really gone down well with the policy makers as some sectors had made good use of the scheme while that was not the case with others. This prompted the government to suggest a further streamlining of the processes as well as providing instant support to those needing help. 

Of course, the government also wants to ensure that the process does not leave any gaps that could be potentially misused of the proposed schemes worth Rs.1.97 lakh crore. Currently, these schemes across 14 sectors, are centrally announced with the implementation being in the hands of the nodal ministries. The program rolled out earlier in this fiscal year. 


PLI scheme targets on course

Officials sources said the PLI schemes have seen investors committing Rs.2.34 lakh crore by end March 2022 across a slew of sectors such as auto, auto parts, battery technology, steel and high-efficiency solar panels. Other segments such as drones, white goods, textiles, telecom, foot products and medical devices are yet to witness major interest. 

The government came up with the scheme with twin targets, the first of them being to generate additional jobs and second being a clear focus to create an atmosphere where global giants can seek out Indian locations to shift their manufacturing business out of China. Of course, from the perspective of these companies, it makes sense to hedge their risks by spreading the supply chain across multiple locations. 


The process and the impact of PLI

In the past, the PLI schemes were created through a rigorous selection process whereby the specific sectors and their impact on the Indian economy was assessed following which prospects in the chosen areas were approached unofficially to get an understanding of what would convince them to shift some, if not all of their manufacturing to India.

The officials said that food processing was a focus area for the government while others such as steel are likely to take a longer time, given the higher gestation periods in the process of both building the plant, getting the machinery and kickstarting the manufacturing process. Currently, the government has created a cycle of investment that would end in March 2024. 

Of course, it needs to be remembered that some sectors such as smartphones, electronics components and pharma began a year ago, in 2021. This explains why the results across these sectors are also better than some others. The report said the next in line was the white goods manufacturing where 15 of the 64 approvals have switched to production phase. 

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