With the need for quality and cost-effective manufacturing becoming even more necessary due, to the disruption and economic implications of COVID-19, and global corporations looking to diversify their manufacturing bases and de-risk their supply chain, India has spotted an opportunity to capitalize on this strategic shift.
India has been active on the policy front and is paving the way to become the world’s most preferred manufacturing hub. The Production Linked Incentive (PLI) scheme is the cornerstone of the Indian government’s masterplan to boost domestic manufacturing and make it globally competitive. Introduced in April 2020, the scheme has set in motion a series of game-changing reforms that will attract global manufacturing majors with a focus on sectors such as mobile phones, electronics, pharmaceuticals, food processing, IT, battery storage, automobile components and specialty steel. The core objective is to signal a turning point for Indian Industry and gain a global presence while boosting economic growth through job creation.
A measure of the government’s seriousness and the scale at which it is pushing the scheme is its outlay: Rs 1.97 lakh crore, or $26 billion, across 13 key sectors. The highlights are:
Linking incentives to output: Incentives will be based on the overall rate of growth in that industry. Beneficiaries will have to consider additional investments in greenfield facilities or even to carry out facility expansions to achieve this increment. All of this will reduce imports too
Results matter: Incentives will be disbursed only after production has taken place in the country. This will boost existing capacities in domestic manufacturing for sunrise and strategic sectors, and make domestic manufacturing globally competitive
Creating ‘champions’ to maximize impact: The focus is on size and scale for the selected industry players to deliver volumes. This will make it exceedingly effective and can make the beneficiaries globally competitive
With manufacturing slowing in June, according to the IHS Markit Purchasing Managing Index, the PLI scheme is a ray of hope. Through this scheme, the government is removing sectoral disabilities, creating economies of scale, reinforcing exports, and creating a robust and vibrant ecosystem of opportunities. The move will offer a pivot strategy to global manufacturers and change their perception of India from being an assembling hub to a manufacturing one.
With this, the PLI scheme also has the potential to create lakhs of jobs (direct and indirect) over four years, adding tremendous thrust to India’s quest to become a $5 trillion economy.
According to the Department for Promotion of Industry and Internal Trade, the PLI scheme does not cover the land required for factories and related constructions. It is a well-known fact that the acquisition of land and securing approvals is otherwise a tedious process in India. Thus, manufacturers looking to capitalize on the PLI incentives need ready, cost-effective, and world-class industrial facilities. This is an opportunity for the industrial-warehousing sector to play a complementary role and provide plug-and-play industrial facilities in India.
At IndoSpace, we have been the leaders in providing Grade A industrial facilities with world class infrastructure in some of the core industrial belts of the country such as Chakan and Ranjangaon in Pune, Oragadam and Sriperumbudur in Chennai, Badli (near IMT Manesar) in Delhi-NCR region, Sri City in Andhra Pradesh and Ahmedabad in Gujarat. Supplementing the government’s efforts to make India a manufacturing hub, we have partnered with some of the leading global manufacturing companies and have delivered industrial space solutions to Jabil Circuits, CTTI, Ericsson, Force MTU, Haier, McWane, Vestas, Mubea and Autoliv.
The impact of the PLI scheme will be felt well beyond the sectors in focus. There will be a domino effect –especially on the warehousing and logistics sector, which has emerged as the backbone of the economy during the pandemic.
The industry is looking forward to being part of India’s manufacturing ambition and support India’s journey towards a $5 trillion economy.
Vice Chairman, Real Estate – The Everstone Group