After bringing Production Linked Incentive (PLI) Schemes in mobile manufacturing and telecom network equipment sectors, India now has also rolled out PLI scheme for Information Technology Hardware, essentially in the sphere of manufacturing of Laptops, Tablets, All-in-One Personal Computers (PCs) and Servers. As we explained in our previous article From Mobile Manufacturing to Telecom Equipment to Computers –India’s PLI Scheme is Scripting a Grand Story, the roll-out of PLI in IT hardware manufacturing asserted the bigger picture of India’s aspiration in becoming the export giant of electronic goods.
Significance of PLI in Hardware – Ask the Apple!
Such is the enthusiasm of foreign manufacturers to shift their base to India, that companies like Apple have been eagerly awaiting this scheme to be rolled out so that they can start making Made in India products.
See how this news item dated back to October 2020 reflected the enthusiasm of Apple and other companies in India’s Production Linked Incentive scheme which was still being formulated at that point in time.
The same report cited above also said:
“Three of Apple Inc’s top contract manufacturers plan to invest a total of almost $900 million in India in the next five years to tap into a new production-linked incentive plan, according to two sources familiar with the matter. Foxconn, Wistron and Pegatron all plan to make investments under the scheme, said the sources, who asked not to be named as the discussions are private.”
How Does PLI in IT Hardware Work?
The total cost of the PLI Scheme for IT Hardware is approximately ₹7,350 crore over 4 years. It offers incentives between 4% to 1% on net incremental sales (over base year i.e. 2019-20) of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four years.
The proposed scheme is likely to benefit major global as well as domestic manufacturers of IT hardware products namely Laptops, Tablets, All-in-One PCs, and Servers.
PLI Scheme is conceived in a manner that incentives are payable by government only after investment has been done, employment has been generated, production and sales targets have been met.
The Present Scene of India’s IT Hardware
Currently, the laptop and tablet demand in India is largely met through imports, valued at ₹ 29,470 crore (USD 4.21 billion) and at ₹ 2,870 crore (USD 0.41 billion) respectively.
The market for IT Hardware is dominated by 6-7 companies globally which account for about 70% of the world’s market share. If these companies expand their operations in India that could make India a major destination for manufacturing of IT Hardware.
What the PLI Scheme for IT Hardware Aims At?
- Over the next 4 years, the Scheme is expected to lead to total production of upto ₹26 lakh crore.
- Out of the total production in the next 4 years, more than 75% are expected to be exports of the order of ₹2,45,000 crore.
- The Scheme will bring additional investment in electronics manufacturing to the tune of ₹2,700 crore.
- The direct and indirect revenues generated from production under this scheme are expected to be ₹15,760 crore over next 4 years.
- The scheme has the potential to generate over 1,80,000 jobs (direct and indirect) over 4 years.
- Domestic value addition for IT Hardware is expected to rise to 20% – 25% by 2025 from the current 5% – 10% because of this scheme. The increase in domestic manufacturing and value addition will help significantly reduce the large foreign exchange outgo that India will have to otherwise bear.
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