India puts up Rs 20K cr to lure global electronics makers, China out

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As part of its push to slash its electronics import bill, India is sending trade delegations to various countries to attract investment in electronics. But no team will be visiting China.

NEW DELHI: India has put up a massive 20,000 crore on the table to lure global electronics makers to set up shop here. But it is not inviting the big daddy of them all - its neighbour China - to the party.

India's Electronics System Design and Manufacturing initiative aims to slash the country's import bill for electronics goods which, if unchecked, could cross $400 billion by 2020 and even race past the amount spent on importing oil.

As part of its push, India is sending trade delegations to various countries, offering sops like tax breaks, to attract investment in electronics. But no team will be visiting China, where more than half the world's contract manufacturing in electronics takes place.

"The anti-dumping cases on Chinese companies are well known," said Ajay Kumar, a joint secretary at the Ministry of Communications and IT who heads the new electronics manufacturing plan. "China is known to grant high subsidies and loans and quote high incentives to attract investment from the world over."

Instead, India hopes to entice investors from countries like South Korea, Taiwan, Japan, Germany and US with its new plan. In a meeting in late June, attended by major consultants like Frost and Sullivan, AT Kearney and PricewaterhouseCoopers, authorities ruled out approaching China for investments.

"It's true that China is not our focus country, but that should not deter any Chinese company to come and invest in India," said Kumar, adding that India was in some sense "competing with China for this kind of investment".

Currently, India's production constitutes only about 1.3% of the global electronics hardware production of $1.7 trillion.

In contrast, China is home to some of the largest electronics manufacturers such as Foxconn, Huawei and ZTE. Foxconn supplies components to almost all popular electronics brands, including Apple and Nokia. On the other hand, Huawei and ZTE have over the past couple of years become the preferred equipment vendors for telecom operators worldwide, including Indian players like Airtel and Reliance.

A senior PricewaterhouseCoopers consultant on e-governance said even if India tried to invite Chinese companies, it was not likely to succeed. "India remains a high cost country for electronics manufacturing in contrast with China," said the PwC executive who did not wish to be identified. "It's an investment promotion scheme, and would be prudent to invite countries where cost of manufacturing is higher than in India, like Japan."

The Indian Semiconductor Association defended India's decision to bypass China, saying the idea is to create intellectual property.

"Countries like the US and Japan have always been on the forefront of design and intellectual property in the world in semiconductor technologies," said Rajiv Jain, associate director at ISA. "China on the other hand leads electronics manufacturing in the world. So, it may be good for India to focus on countries which drive IP and product creation."

Communications and IT Minister Kapil Sibal is expected to lead a delegation to Germany in September to showcase India's new policy. India will begin accepting applications for the investments from October. Through its recently announced Modified-Special Incentive Package Scheme, or M-SIPS, the Indian government offers up to 20% subsidy on capital expenditure incurred to set up manufacturing plants for electronics. If the plants are not in special economic zones, then the discount will be up to 25%.

harsimran.julka@timesgroup.com

Source: http://economictimes.feedsportal.com/fy/8av2Fvy0ddPUe32q/story01.htm

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