Production-Linked Incentive Scheme Could Add $55 Billion To GDP In 5 Years, Says Credit Suisse
An employee gestures towards the box of an Apple Inc. iPhone 11 Pro smartphone at an Apple store during a product launch event in Hong Kong, China. (Photographer: Kyle Lam/Bloomberg)

Production-Linked Incentive Scheme Could Add $55 Billion To GDP In 5 Years, Says Credit Suisse

India’s incentive scheme for large scale electronics manufacturing in the country could help add 0.5% to economic growth in five years, according to financial services firm Credit Suisse. And iPhone-maker Apple Inc., with its contract manufacturers looking to set shop in India, could be the driving force.

A total of 22 international and local companies have applied for the scheme, including iPhone assemblers Foxconn, Pegatron and Wistron, which will bring an additional almost 10% of global handset production to India in the next five years, Credit Suisse estimated in its recent note.

Even if these companies meet the minimum thresholds for domestic manufacturing, it could end up adding around $55 billion to the country’s GDP over five years, Credit Suisse said. The government, however, cumulatively expects almost $150 billion to be added to the economy with around three lakh direct jobs.

Prime Minister Narendra Modi’s production-linked incentive scheme aims to boost India to be among the top three hubs of global mobile manufacturing. The scheme extends a 4-6% incentive on incremental for five years to large-scale electronics manufacturing companies for setting up their facilities in Asia’s third-largest economy. Electronics manufacturing in the country grew by 1.7 percent from 2012 to 2018, a jump of $41 billion.

Most of this, Credit Suisse said, will be a shift from China, mainly due to Apple. “This would occur mainly through its contract manufacturers: Foxconn, Pegatron and Wistron, which could see, respectively, about 8%, 15% and 20% of additional manufacturing annually happen in India in year 5,” the note said.

The Indian government expects 60% of this output to be exports. A bulk of this is likely to be Apple, whose India sales are only $1.5 billion currently (of which 1/3 are locally made). In China, it produced~ $220 billion (85% for exports) in 2018-19.
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