Key Points
Kunal Chaudhary, indirect tax partner at EY India, told ThePrint, that before the introduction of the PLI scheme, previous methods aimed at drawing industry interest, such as the gradual implementation of custom duties or issuing export incentives like the Merchandise Exports from India Scheme (MEIS), yielded limited success..
While India was not very successful in capturing redirected investments away from China following the trade wars (Vietnam and other Southeast Asian nations were more successful then), the PLI schemes were launched at an opportune time to capture newer investments following pandemic-induced supply chain reorientation, she said.. Citing the data from the International Trade Centre, Thomas said that Indias exports of telephone sets (including smartphones) grew at a CAGR (compound annual growth rate) of 58.4 percent between 2020 and 2023, while Chinas shrank at a CAGR of 0.5 percent during this period...
In addition, India has the inherent advantages of a large domestic market, he said.. PLI schemes, Thandavarayan added, compensate for structural challenges in the target sectors, such as absence of economies of scale, lower productivity, high financial costs, logistics inefficiency, etc., which impact the global competitiveness of Indias manufacturing...
With economies of scale, cost structure becomes favourable for India and productivity also increases, making Indias manufacturing globally competitive, he said.. Krishan Arora, partner at Grant Thornton Bharat, said that the success of mobile PLI is evident from the substantial investments of approximately Rs 4,784 crore, production worth about Rs 2,03,952 crore, and the creation of 45,485 new jobs...
Going forward, the government would potentially look at incentivising some of the critical value chain elements of electronic manufacturing, and therefore increasing the domestic value addition, which is currently at 15-20 percent We shall target 40-50 percent of domestic value addition through the next level of PLI scheme, covering the critical elements of the value chain, where we want to develop the domestic manufacturing ecosystem, Thandavarayan said.. Chaudhary noted that green shoots in the component ecosystem have emerged with large companies, such as the TATA group, entering the component manufacturing space..
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