Boost to IT hardware manufacturing

The Union government recently unveiled its Production-Linked Incentive (PLI) Scheme 2.0 for the IT hardware sector with a budgetary outlay of Rs 17,000 crore. The revised norms of the scheme come on the wings of soaring hopes that it will incentivise and spur growth across the sector as it has done for mobile phone manufacturing. India is the second largest manufacturer of handsets, recording exports of Rs 90,000 crore this year. The PLI 2.0 decision came after consultations with stakeholders, including major global manufacturers. The first edition of the scheme in 2021 had not quite enthused the sector. Data suggests that by the first half of last year, the sector had received some Rs 123 crore investment against an expected Rs 2,500 crore.

The prospects of India benefitting from the current global environment remains bright as governments and companies around the world build their China-Plus One supply chain strategies, first triggered by the US-China trade war initiated by former US President Donald Trump and aggravated by China’s prolonged ‘Zero-Covid’ lockdowns during the pandemic. India was quick to realise the potential for growing its own manufacturing sector presented by the global concerns over supply chain disruptions and the imperative to develop alternative robust global value chains. According to one estimate, India is among the top three countries to export computer hardware, after the United States and China.

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Market estimates suggest that India could surge ahead to the second position. Major global manufacturers such as Dell, HP, Apple, Asus and others have been in conversation with the government and the current scheme, like the original edition, will cover the production of laptops, tablets, all-in-one personal computers and servers. Among the factors behind the tepid response to the scheme in 2021 was the reluctance of companies to scale up capacity on account of inadequate demand for personal computers and tablets. The government expects that the PLI 2.0 decision and its solid budgetary outlay, spread over six years, should attract incremental investment of Rs 2,400 crore and production worth Rs 3.35 lakh crore.

The grand plan and calculations would require regular monitoring and periodic assessment to identify irritants, or if the industry’s response does not translate into a trajectory of growth. Policymakers and planners can take a leaf out of the success story in mobile manufacturing in the country. The move by leading Taiwanese electronic manufacturing giants such as Foxconn to open factories in Telangana and Karnataka as well as the move by Apple to open its retail stores in the country are signs that with the right mix of policies and incentives, India’s IT hardware manufacturing landscape can change for the better.