India Extends Production-Linked Incentives To Pharma, IT Hardware Sectors
Tablets move along a conveyor on the production line at a pharmaceutical plant in Goa, India. (Photographer: Dhiraj Singh/Bloomberg)

India Extends Production-Linked Incentives To Pharma, IT Hardware Sectors

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The government on Wednesday extended the production-linked incentive scheme to the pharmaceutical and information technology hardware sectors, offering over Rs 22,000 crore worth of sops to boost domestic manufacturing and create jobs.

The PLI scheme will help India export IT goods worth Rs 2.45 lakh crore and Rs 1.96 lakh crore of pharma products over 2022 to 2028, Communications and IT Minister Ravi Shankar Prasad said while briefing reporters on decisions taken by the Union Cabinet headed by Prime Minister Narendra Modi.

The scheme provides manufacturers cash-backs of between 1% and 4% of additional sales of locally-made goods over a certain period, with 2019-2020 as the base year.

While Rs 15,000 crore of incentives will be provided for the pharma sector over a period of 2020-21 to 2028-29, Rs 7,325-crore PLI will be made available for domestic manufacturers of laptops, tablets, personal computers and servers for four years.

"The focus of the scheme is to get global champions to India and to make national champions out of local manufacturers," Prasad said.

The scheme for the IT hardware sector envisages production of Rs 3.26 lakh crore and exports of Rs 2.45 lakh crore over the next four years, creating 1.8 lakh jobs.

The same for the pharma sector is expected to promote the production of high-value products in the country and increase the value addition in exports.

Total incremental sales of Rs 2.94 lakh crore and total incremental exports of Rs 1.96 lakh crore are estimated during six years from 2022-23 to 2027-28, creating 20,000 direct and 80,000 indirect jobs.

The PLI push for hi-tech IT hardware gadgets comes close on the heels of the Cabinet last week clearing a Rs 12,195 crore scheme for telecom equipment manufacturing.

An incentive scheme for mobile phone manufacturing was announced last year and has since garnered strong response from players despite the challenging times of the pandemic.

The PLI scheme for IT hardware announced on Wednesday will benefit five major global players and 10 domestic champions, an official statement said.

The PLI scheme is expected to enhance the development of the electronics ecosystem in India, at a time when global manufacturing is undergoing a shift and companies across the world are looking to diversify their manufacturing locations to mitigate the risk involved in depending on a single market.

"India will be well-positioned as a global hub for Electronics System Design and Manufacturing on account of integration with global value chains, thereby becoming a destination for IT hardware exports," the statement said.

Also read: India’s PLI Scheme To Boost Bulk Drug Output Faces These Hurdles

The scheme will usher additional investment in electronics manufacturing to the tune of Rs 2,700 crore.

At present, the laptop and tablet demand in India is largely met through imports valued at Rs 29,470 crore and at Rs 2,870 crore, respectively.

The market for IT hardware is dominated by 6-7 companies globally which control about 70% of the world's market share. These companies are able to exploit large economies of scale to compete in global markets.

As many as 16 companies were approved under the first round of the PLI scheme for large scale manufacturing of mobile phones and specified electronic components.

Another scheme for promoting manufacturing of electronics components has also received 22 applications involving an investment of about Rs 13,500 crore in the areas of active, passive and electromechanical components, displays and mechanics for mobile phones.

Also read: Government Approves Rs 12,200 Crore PLI Scheme For Telecom Equipment

The PLI for the pharma sector is expected to bring in an investment of Rs 15,000 crore and promote innovation for the development of complex and high-tech products, including products of emerging therapies and in-vitro diagnostic services as also self-reliance in important drugs.

It is also expected to improve accessibility and affordability of medical products including orphan drugs to the Indian population, the release said.

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