In an attempt to attract more foreign investment from smartphone manufacturers during these trying times, the Indian government has dropped a few clauses from its production-linked incentive (PLI) scheme and has planned an incentive of about $6.6 billion. According to a recent report from the Economic Times, officials familiar with the matter have revealed that the government has dropped a clause that "evaluated plant and machinery brought into India at 40% of its value" which was opposed mainly by Apple.

Along with the aforementioned clause, the government has agreed to a few other changes to the PLI scheme which will pave the way for smartphone manufacturers to boost production in the country. These changes include giving investors a say in future changes to the PLI scheme, removal of various caps, and another clause which stated that the government would release the incentive despite the industry meeting its targets only if it had the money to do so. Additionally, a clause of force majeure has been added to the scheme which permits the companies to seek reliefs from the set targets during times of natural calamities such as COVID-19.

Furthermore, a separate report from Bloomberg reveals that the government is also planning financial incentives of about INR 500 billion (~$6.6 billion) to attract investments from more companies in the smartphone and related components sector. As per the ministry of electronics and information and technology, the government will initially target 5 global suppliers and extend an incentive of as much as 6% on incremental sales for goods made in the country over a period of five years. The government will also provide an incentive of 25% on capital expenditure for the production of electronic components, semiconductors, and other parts. The manufacturers will also be offered electronics manufacturing clusters with ready-to-use facilities.

During a press conference in New Delhi on Tuesday, Minister for Electronics and Information Technology, Ravi Shankar Prasad, said that the move is expected to make India a global hub for mobile phone manufacturing and make smartphones the largest exported item out of India, while also generating half a million jobs. In a statement regarding the planned incentives, Amitabh Kant, CEO at Niti Aayog, was quoted saying, "The schemes will help India become totally self-reliant and penetrate global markets...It will bring global value chain and enable India to become a leader in electronics manufacturing."

The updated PLI scheme and proposed investments come at a time when a number of US-based companies are exploring avenues to diversify smartphone manufacturing out of China under the 'China plus one strategy'. It's also worth noting that increased domestic production might also be beneficial for the Indian consumer, as it could result in smartphones getting cheaper in the country.

Source: Economic Times, Bloomberg