India's high-tech sectors can create 550,000 direct jobs and 1,400,000 indirect jobs over the next 5 years: USISPF

Washington: India's high-tech sectors have the potential to attract a whopping USD21 billion in investment and create millions of jobs over the next five years, according to a top US business advocacy group.

The US-India Strategic and Partnership Forum (USISPF) in a recent report "Hi-tech Manufacturing in India", submitted to the Indian government, stated that India's high-tech sectors can create 550,000 direct jobs and 1,400,000 indirect jobs over the next five years.

The report is based on the feedback received from top American companies in this sector interested in investing in India.

"India's high-tech sectors (such as electronics, aviation, medical devices) have the potential to offer an additional investment of USD21 billion and create 550,000 direct jobs and 1,400,000 indirect jobs over the next 5 years," USISPF president Mukesh Aghi said.

"Industry looks forward to working with the government to make India a world-class manufacturing hub that can strengthen domestic manufacturing as well as support India's export sector to create the much-needed jobs for Indians," he said.

While electronics, aerospace and medical devices have witnessed the entry of various global multinational companies in India for manufacturing, the country's share in global production within these sectors is less than three per cent, the report said.

The report is a result of USISPF's initiative comprising of senior global executives from different industries to develop a set of recommendations as India advances a hi-tech manufacturing ecosystem in the country.

The study among other things examines the factors that are impacting India's competitiveness for companies planning to setup manufacturing operations in the country, and how these challenges can be addressed to make the country a dynamic player in the global value chain.

Some of the major challenges identified include the need for a strong supplier ecosystem, reduction in logistics cost, enhance skilled workforce, and enabling regulatory policies, Aghi said.

The report also seeks widening of Goods and Services Tax (GST) coverage by bringing in products/sectors presently excluded from it to help reduce cascading impact of taxes and manufacturing cost.

"In the interim refund of indirect tax on above items and GST on supplies ineligible for credit to be provided for improving cost competitiveness," the report recommended as it also sought higher tax benefits for research and development in these sectors.

Recommending "consistency in policies and expediting of approval processes," the report suggests competitive bidding for government procurement, and enforcement mechanism to ensure central and state governments are aligned.

For the electronics sector, the report recommends uniform duty structure across commodities by eliminating anomalies in HSN; appropriate classification of products to mitigate the risk of classification disputes and continued exemption in the form of zero duty for routers and other products as indicated in the Information Technology Agreement.

The report also recommends to link preferential market access (PMA) to exports and rationalise local value-addition norms to achievable targets.

It seeks revisions to PMA policy by incorporating the 'Substantial Transformation' rules for value-addition as per global norms which adds another option of measuring local value add rather than only based on Bill-of-Material (BOM) and providing deemed domestic manufacturing credits to OEMs for 100 per cent of their manufacturing volume - independent of product, export domestic consumption.

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