In order to boost the manufacturing sector, the government has resorted to introducing a performance-linked incentive (PLI) scheme for various manufacturing sectors.
For this, the cabinet has recently approved the Production Linked Incentive (PLI) Scheme for IT Hardware.
The scheme intends to attract global hardware manufacturers to manufacture locally. The major objective here is to manufacture IT hardware components like laptops, tablets, all-in-one PCs, and servers in India.
India has Rs 34,000 crore annual market for IT hardware. Out of that, about 80-82% is imported from China, Taiwan, and Singapore.
Benefits of the PLI scheme?
Under the proposed scheme, the government has earmarked approximately Rs 7,350 crore over four years. It will provide an incentive of up to 4% on the net increment of goods manufactured in India over the next four years.
The scheme intends to position India as a global hub for Electronics System Design and Manufacturing (ESDM). Thereby, the major thrust will be on developing global value chains and becoming a major IT Hardware exporter.
The government is expecting total production will be worth Rs 3.26 lakh crore over the next five years under the PLI scheme for IT hardware. Out of which about 75% will be exported. It will also increase value addition done by IT and hardware sectors to 20-25% from 5-10% currently. The government also expects to create over 1,80,000 jobs over four years.
What's lacking?
The scheme is largely beneficial to establish India as a hardware manufacturer. However, India needs to develop the capacity to manufacture semiconductors. Without that, it will continue to depend on exports of IT hardware.
Semiconductors are the key component for these devices and are imported from China and Taiwan. Currently, India lacks the infrastructure to make semiconductors domestically and it needs to build the facility right from the scratch. The cost of setting up a semiconductor facility would cost almost Rs 7,500 crore. And, it is expected to take at least 3-5 years before such factories are set up in India.
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