PLI scheme to boost IT hardware manufacturing

The Rs 7,350 crore initiative will enhance development of electronics ecosystem in the country

GN Bureau | February 24, 2021


#PLI   #IT hardware   #technology   #business   #union cabinet   #AtmaNirbhar Bharat  
(Illustration: Ashish Asthana)
(Illustration: Ashish Asthana)

A production-linked incentive (PLI) scheme with a cost of Rs 7,350 crore over four years was approved by the union cabinet Wednesday, aiming to boost domestic manufacturing and attract global investment in IT hardware like laptops, tablets, PCs and servers.

The scheme extends an incentive of 4% to 2%/1% on net incremental sales (over base year 2019-20) of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four years. It is likely to benefit five major global players and 10 domestic champions in the field of IT hardware manufacturing including laptops, tablets, all-in-one pcs, and servers, an official release said. “This is an important segment to promote manufacturing under AtmaNirbhar Bharat as there is huge import reliance for these items at present.”

The total cost of the proposed scheme is approximately Rs.7,350 crore over four years, which includes an incentive outlay of Rs.7,325 crore and administrative charges of Rs.25 crore.

The scheme will enhance the development of electronics ecosystem in the country. India will be well positioned as a global hub for Electronics System Design and Manufacturing (ESDM) on account of integration with global value chains, thereby becoming a destination for IT Hardware exports. It has a potential to generate over 1,80,000 direct and indirect jobs over four years.

It will provide impetus to Domestic Value Addition for IT Hardware which is expected to rise to 20%-25% by 2025.

The vision of National Policy on Electronics 2019 notified on February 25, 2019 is to position India as a global hub for ESDM by encouraging and driving capabilities in the country for developing core components, including chipsets, and creating an enabling environment for the industry to compete globally.

Currently, the laptop and tablet demand in India is largely met through imports valued at USD 4.21 billion and USD 0.41 billion respectively in 2019-20. The market for IT Hardware is dominated by 6-7 companies globally which account for about 70% of the world's market share. These companies are able to exploit large economies of scale to compete in global markets. It is imperative that these companies expand their operations in India and make it a major destination for manufacturing of IT Hardware.

Given the current global scenario, the world of manufacturing is undergoing a paradigm shift. Manufacturing companies across the globe are looking to diversify their manufacturing locations to mitigate the risk involved in depending on a single market.

Last year, a similar PLI scheme for mobile phones and specified electronic components was launched amid the pandemic to establish India as a hub of electronic manufacturing. It has been a huge success in terms of interest received from global as well as domestic mobile manufacturing companies. Sixteen companies were approved under the first round of the PLI Scheme for large scale manufacturing of mobile phones and specified electronic components.

Based on initial success of the PLI Scheme for mobile phones and specified electronic components, 10 target sectors along with specific product lines having high growth potential were identified by NITI Aayog for implementation of PLI Schemes. The one for IT Hardware is a further step in that direction. It comes in close wake of a PLI Scheme for Telecom and Networking Products that was approved by Union Cabinet last week.

 

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