The Union cabinet on Wednesday approved a proposal to offer as much as ₹1.45 trillion in incentives to persuade global companies in 10 sectors, including automobiles, drugs and textiles, to set up factories in India as they look to diversify their supply chains amid US-China tension.
The expansion of the production linked incentive (PLI) scheme, which is already in force for electronics production since April, to additional sectors will also help create jobs, Union minister Prakash Javadekar told reporters. “This will benefit all sections of society,” said Javadekar. The PLI scheme now offers manufacturers benefits worth ₹1.97 trillion, including those for electronics production.
Finance minister Nirmala Sitharaman, who was present at the press briefing, said the decision was aimed at giving necessary support to “critical and sunrise sectors” with the idea of making India a part of the global supply chain. There is no cap on the number of companies that can apply to avail of benefits offered under the scheme, Sitharaman said.
To boost investments, the government last year slashed corporate tax rate for new manufacturers and to businesses not availing of any tax breaks, but a demand slump resulted in a lukewarm response. The government wants to boost manufacturing and is simultaneously pursuing a ₹100 trillion investments into infrastructure over the next few years to steer the economy out of its current slump. The production incentives may help global manufacturing firms exploring a China-plus-one strategy. Also, large production units will mean more business for small and medium enterprises, the backbone of India’s manufacturing and exports sectors.
The decision will give a huge momentum to the manufacturing sector, said Chandrajit Banerjee, director-general of Confederation of Indian Industries.