India’s budget this year has gone paperless for the first time. That’s because this pandemic makes the traditional practice of locking dozens of Treasury staff in government printing houses insecure to ensure that any blueprint secrets are not leaked. Instead, Finance Minister Nirmala Sitharaman (Nirmala Sitharaman) submitted a spending plan to Congress, which was read from Samsung’s tablet, and the media went to great lengths to label it as “Made in India”​​ .

Sitharaman said in his speech on February 1st: “Our manufacturing company needs to become an integral part of the global supply chain, with core competitiveness and cutting-edge technology.” The government spending plan for the next fiscal year scheduled to begin on April 1st This includes a 28 billion U.S. dollar (approximately 20.161 billion rupees) plan to persuade foreign manufacturers to start operations in India. It provides cash incentives to meet certain sales targets in the automotive, electronics, and pharmaceutical industries, and aims to attract investors from regional competitors with lower operating costs, such as China and Vietnam.

According to official forecasts, the plan is part of Prime Minister Narendra Modi’s “Self-reliant India” plan, which is expected to increase by US$520 billion (approximately Rs 3,73,590 crore) within five years. output value. Credit Suisse predicts that by 2027, its gross domestic product (GDP) will grow by 1.7% while creating 2.8 million jobs.

Manufacturing as a share of India’s GDP

Convincingly, the use of India’s self-reliance as a repackaged version of an ambitious ambition has repeatedly outlined this ambition over the past few decades. The most recent was the “Made in India” activity of Prime Minister Modi. The plan was released in 2014 and aims to increase the contribution rate of manufacturing to GDP from 15% to 25% within five years. On the contrary, the share dropped and is now down by about 13%.

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There are some early signs of success this time. In February, Amazon announced plans to establish a production line with Kingsoft Electronics in Taiwan. The production line will cooperate with Taiwanese electronics giant Foxconn’s subsidiary in India to produce fire-fighting TV streaming media equipment. Apple said this month that it will start producing the iPhone 12 in India for local customers. Tanvee Gupta Jain, an economist at UBS Securities in Mumbai, said: “The shift to India has begun to gain momentum.” “This is a major shift in Indian manufacturing policy. .”

PM Modi’s government is recruiting other well-known foreign manufacturers, including Tesla, which submitted paperwork in January to register its business in India, which sparked speculation about its plans to open a production line in India . Although the company did not comment on the rumors, Federal Transport Minister Nitin Gadkari (Nitin Gadkari) said the government is prepared to provide incentives to ensure that Tesla’s cost of manufacturing electric cars in India is lower than in China.

In late February, the PM Modi cabinet approved the allocation of US$1 billion (approximately Rs 72.6 billion) from a larger incentive plan for a plan aimed at expanding domestic production of tablets, laptops and computers. The plan failed Keep up with the surge in demand. According to a report issued by India’s mobile phone company commissioned by India, in the past five years, only laptop imports (mainly imports from China) have soared by 42%, and are estimated to have reached nearly 50% in this fiscal year. Billion U.S. dollars (approximately Rs 362.8 billion). Electronics Association. Under the new regulations, companies will be eligible for cash payments equivalent to 6% of their sales value, depending on how much they increase domestic production.

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For a long time, India’s story is that for every optimistic new entrant, there is a war-scarred company looking for the door. Harley Davidson withdrew from India at the end of last year, and Toyota Motor threatened to shelve expansion plans in September because of the high taxes imposed on new car purchases in India. The reasons for the fleeing of foreign companies are deep-rooted trade protectionist tendencies, complex regulations and crumbling infrastructure. In the World Bank’s latest Doing Business Report, India ranks 63rd out of 190 countries surveyed by the World Bank. HSBC chief India economist Pranjul Bhandari (Pranjul Bhandari) said that China ranked 31st and South Korea ranked 5th. “The real problem in India is the uneasiness of doing business.”

Average applied tariff

Worldwide, shortages and supply chain disruptions caused by the pandemic have brought new urgency to government-led efforts to achieve greater self-sufficiency, whether in the field of ventilators or semiconductors. China’s latest five-year plan considers large investments in areas such as integrated circuits and clean technology, and in the United States, the Biden administration urged Congress to allocate appropriate subsidies to stimulate the construction of new US fabs.

Historically, India’s efforts to cultivate its domestic supply chain have relied heavily on import tariffs, which are still the highest of any major economy in Asia. By increasing investment incentives for the arsenal, the government hopes to persuade more multinational companies to open factories in the country. If the policy mix seems inconsistent, it is because in India today, economic priorities often run counter to political realities. Prime Minister Modi must raise the level of manufacturing in order to create 10 million new jobs every year. The country needs to accommodate its growing labor force and curb the particularly serious trade deficit, especially the trade deficit with China. But he must also cater to the small and medium-sized enterprises that make up the base of the ruling Bharatiya Janata Party, and they have become accustomed to being immune to foreign competition.

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This conflict makes it difficult to judge whether “self-reliant India” will succeed where the initiatives of the past few years have failed. India is the second most populous country in the world, and it should have sufficient incentives for foreign companies. PM Modi’s sweeteners may surprise more people.

©2020 Bloomberg (Bloomberg LP)


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