THE PLI SCHEME AND WHAT IT MEANS FOR INDIAN SMARTPHONE MANUFACTURERS

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The Government of India (GoI) announced an outlay of INR 1.97 lakh crores for Production Linked Incentive (PLI) Schemes in 2020 across 13 key sectors. This move was envisioned to help create a thriving manufacturing environment within India through which numerous benefits are to be reaped. Let’s take a look at how this impacts the smartphone sector in India and what lies ahead.

PLI schemes are a means to encourage manufacturers within India to ramp up their production efforts in this hugely competitive environment of supply, demand, and consumption. They help provide incentives to companies, primarily in the form of tax rebates, and import-export concessions. Some sectors namely automobiles, electronics, aviation, pharmaceuticals, etc. among the announced 13 were set to help India make gains with their vast potential for growth and development. One such which got an INR 7,350 crore boost across a five-year period between 2021-2026 was the electronics manufacturing sector.

Four schemes were notified in an attempt to position India as a global hub for Electronics System Design and Manufacturing (EDSM) and further the vision of the National Policy on Electronics (NPE). With a 25% Compound Annual Growth Rate (CAGR) over the past five years, the domestic production of electronics hardware touched $76 billion in 2019-2020. Marching forward with the vision to create manufacturing clusters across the country, the electronics industry which currently employs over two million people in India alone, has the opportunity to add more feathers to its cap. How does this correspond with the smartphone sector?

Many Indian electronics producers such as Bhagwati Private Limited, Dixon Technologies, Infopower Technologies, etc., stand to gain from this move. Dixon Technologies; India’s largest electronics products manufacturer; is aiming to produce 500,000 laptops and 2.5 million tablets in the first year of the scheme’s launch alone as they prepare to open their 13th manufacturing unit in the country, while Bhagwati Products has invested over INR 100 crores in the market and is in talks with multiple international brands for the production of laptops and tablets as well.

In order to qualify for incentives, companies are required to invest INR 20 crores and achieve sales in incremental values across this five-year period. PLI schemes have given Indian manufacturers the chance to grow economically, technologically, and of course globally as they work towards attracting international brands in contracting them for production and exports to achieve these mutually-beneficial targets. Additionally, manufacturers across the board have applauded the government’s initiative to make India into the next global electronics manufacturing destination with an aim to support trade and industry in a realistic manner.

In a covid-hit economy, the provision of incentives to companies while projecting growth in terms of production, supply, and even employment is a welcome move. Said to create close to 2 lakh direct jobs over the next five years along with thrice as many indirect employment opportunities, companies are in gear to make the most of these schemes that have something in it for everyone.

Aimed at achieving an expected growth from 15-20% to 35-40% in the case of mobile phones, and 45-50% for electronics, the PLI schemes will put India on par with global contributors like Vietnam and China which control 85% of the global export market. Additionally, it allows manufacturers the opportunity to diversify their supply chains from the monopoly of China to steer clear from geo-political pressures.

Conclusion
Not only does this program give Indian manufacturers a boost to stand amidst global players, it also allows for the creation of an ecosystem that helps mitigate pandemic-related economic stress where domestic demand and exports are concerned. Therefore, there’s a lot of growth to look forward to as producers deep-dive into the opportunities of the GoI’s PLI schemes.

 

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