![IT Hardware PLI scheme taking domestic manufacturing to the next level IT Hardware PLI scheme taking domestic manufacturing to the next level](https://varindia.com/storage/news/uploads/2018/02/647599f6666a7.jpg)
India is seen as an emerging manufacturing hub in global value chains, as a growing consumer market and as a hub for ongoing digital transformation. The PLI scheme for IT hardware, both the first and the second version offers significant benefits to eligible manufacturers, including financial incentives, enhanced competitiveness, reduced import dependence, job creation, and long-term support -
The Production Linked Incentive (PLI) scheme is the very fulcrum of making India self-reliant. It aims to make India self-reliant in manufacturing goods for local and export markets, besides positioning it as a global manufacturing hub.
“The scheme further aims to make domestic manufacturing competitive, augment capacities, accrue economies of scale, enhance exports, attract investment and create jobs,” says Anurag Awasthi, Vice President - India Electronics and Semiconductor Association. “Investments in capital-intensive sectors have a much larger fruition period and are complex. The PLI Scheme which is essentially based on incremental output is more effective than the other grant-based subsidies and thus reduces Government expenditure. In addition, PLI facilitates innovation and research, development and up-gradation of technology of Indian firms for a vibrant home-grown manufacturing ecosystem."
PLI scheme for IT hardware
The PLI scheme is a government-initiated program which was launched in 2021 financial budget with an outlay of Rs. 7,350 crore. The main aim of the scheme is to promote domestic manufacturing in India while discouraging cheaper imports from other nations. The scheme, besides helping all the Indian manufacturers, is designed to give a financial impetus for increasing the sale of Indian made products, in turn developing local talent into world champions.
The PLI scheme is considered a major boost to the Make In India initiative of the Indian government rolled out in 2014. The benefits that PLI scheme brought to Make In India are -
>> Generating employment opportunities and job creation
>> Promotion of domestic manufacturing
>> Giving a boost to Vocal for Local which is again an Indian government initiative
>> Cutting down on export costs
>> Upgrading the skills of existing labour force
Industry hails PLI 2.0
Following the success of the first edition, the Union Cabinet, chaired by Prime Minister Narendra Modi, has given its approval for the second edition of the PLI scheme for IT hardware with a Rs.17,000-crore outlay.
"Supporting startups in the IT manufacturing sector through incubation centers, mentoring, and access to funding can encourage entrepreneurship."
Piyush Somani, Chairman & MD, ESDS Software Solution
Speaking about the PLI 2.O for IT hardware, which was announced on 17 May, 2023, Anurag Awasthi says that it is a very well-conceived and efficient scheme both in planning and budgetary overlays. “Foreign entities under the PLI policy have to co-locate with their established industrial ecosystems. This will reduce government expenditure to invest and develop the ecosystems for the investor and bring the assemblers and component manufacturers together, thereby reducing the effective cost of manufacturing. As a future waypoint service industry, which is big in India could also be looked at from the policy prism in this domain.”
A Gururaj, MD - Optiemus Electronics too calls it an excellent step for the comprehensive growth of the Indian electronics manufacturing industry. “Apart from traditional categories like mobile and telecom, the special focus given to IT Hardware showcases the astute vision of our government.”
"Apart from traditional categories like mobile and telecom, the special focus given to IT Hardware showcases the astute vision of our government."
A Gururaj, MD - Optiemus Electronics
He further continues, “Optiemus Electronics is manufacturing IT Hardware for many reputed brands under the current PLI and now with the PLI 2.0, we are actively considering and evaluating our options to participate in this new phase of growth in electronics manufacturing. On behalf of the industry, we would like to thank the electronics minister and Hon’ble Prime Minister for this visionary step taken.”
Expressing its warm welcome to the Government’s announcement of the updated PLI scheme 2.0, Electronic Industries Association of India (ELCINA) says that the revised scheme, which nearly doubles the overall outlay to approximately Rs. 17,000 crore, is a significant step towards bolstering the domestic manufacturing ecosystem.
Sanjay Agarwal, President of ELCINA contends, “The PLI Scheme 2.0 will help India emerge as a hub for IT Hardware manufacturing and increase the country's exports. It will encourage domestic companies to manufacture more IT hardware products in India and promote the development of the IT hardware ecosystem in the country.”
Under the six-year tenure of the PLI 2.0 scheme, the government aims to attract investments worth Rs. 2,430 crore. It will also aim to create employment opportunities for around 75,000 people within the next six years. ELCINA acknowledges that this initiative addresses a long-standing demand of the industry and commends the government for actively considering and implementing it.
"The PLI Scheme 2.0 will help India encourage domestic companies to manufacture more IT hardware products and promote the development of the IT hardware ecosystem."
Sanjay Agarwal, President, ELCINA
The scheme offers incentives to three categories of companies - Global IT Hardware Companies, Hybrid (Global/Domestic) Companies, and Domestic Companies. Existing PLI 1.0 applicants are also allowed to apply under PLI 2.0.
“ELCINA welcomes the flexibility and migration provisions of the PLI 2.0 scheme. This feature is especially heartening as it will enable more companies to take advantage of the scheme and invest in the growth of the Indian electronics and IT industry,” Sanjay says. “The PLI 2.0 scheme will further foster sectoral growth, making India a global hub for IT hardware manufacturing. The association remains committed to working closely with the government to ensure the effective implementation of the scheme and to support the growth and development of the electronics industry in India.”
Manufacturing - a catalyst for economy’s growth
The IT industry is considered to be the backbone of the Indian economy. It is the most flourishing industry in the country and it gets further boosted with launch of government initiatives like Digital India, Make in India, PLI schemes etc.
"The PLI Scheme which is essentially based on incremental output is more effective than the other grant-based subsidies and thus reduces Government expenditure.”
Anurag Awasthi, VP - India Electronics and Semiconductor Association
The manufacturing industry, including IT manufacturing, is a significant contributor to the Indian economy. It accounts for a considerable portion of GDP and employment generation. According to a report by the India Brand Equity Foundation, the country is home to more than 6,000 hardware and software technology startups, and the sector is expected to grow at a CAGR of 12.6% between 2021 and 2026.
However, Piyush Somani, Chairman & Managing Director ESDS Software Solution Ltd. points out that in order to realize this potential fully, certain policy changes are required. “The government can focus on increasing incentives for research and development in the IT manufacturing sector, such as tax breaks and grants for companies that invest in R&D. This can lead to the development of new products, increased innovation, and job creation.”
“Additionally, the government can provide more support for the development of IT manufacturing clusters, which can help reduce costs and improve efficiency by creating a more collaborative and competitive environment,” he continues. “Encouraging greater collaboration between industry and academia can also promote research, training, and the development of new technologies. Also supporting startups in the IT manufacturing sector through incubation centers, mentoring, and access to funding can encourage entrepreneurship and the creation of new businesses, leading to job creation and economic growth. Proving that the IT manufacturing industry has significant potential to create a growth ecosystem for the Indian economy, and policy changes can help make it more efficient and effective.”
In its report, McKinsey states that the Indian manufacturing industry is increasingly adopting digital technologies to disrupt the traditional manufacturing process, and this could add up to $550 billion to $1 trillion of economic value per year by 2025 in India's manufacturing industry alone. The adoption of Industry 4.0 is expected to help India's manufacturing sector grow by $280 billion by 2026.
“The use of digital technologies in manufacturing is enabling companies to collect and analyze vast amounts of data, leading to improved decision-making and greater efficiency,” points out Piyush. “Moreover, the use of cloud-based platforms and other digital tools is facilitating greater collaboration between manufacturers and their suppliers and customers. It is therefore crucial for Indian manufacturers to continue to invest in and leverage digital technologies to remain competitive and contribute to the growth of the Indian economy.”
However
A few changes as recommended by the industry in terms of policies can make this scheme even more industry friendly. Policies include increase in Government’s tariff on import duty to encourage more manufacturing within the country, better and more financial incentives for the MSME sector and budding entrepreneurs in order to make more product in India and export to other nations, to name a few. Moreover, if big companies like TATAs, Reliance, Infosys, Wipro buy their products, it will gradually become a trend in which more people will join to do the same.
Post COVID, the industry has understood that major disruptions in the industry come only there is a necessity. There have been major breakthroughs by IITians across India. A platform can be created where think-tanks from the technology background can be invited to deliberate on such topics of interests in order to show appreciation and give motivation in the form of incentives.
KEY DEVELOPMENTS UNDER PLI SCHEME
February, 2021
The government approves the first edition of the PLI scheme for IT hardware, covering the production of laptops, tablets, All-in-One PCs and servers with an outlay of Rs. 7,350 crore.
July, 2021
The government receives 23 applications for the Rs 76,000 crore production-linked incentive scheme announced for semiconductors. The scheme was announced in December 2021 amid chip shortage.
The Ministry of Electronics and Information and Technology approves 14 eligible applicants under the PLI for IT Hardware, which included Dell, Foxconn subsidiary Rising Stars, Flextronics, Dixon Technologies, Panache Digilife, Netweb Technologies, Smile Electronics etc.
February, 2022
The government approves proposals of 20 companies under the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), including that of Tata Electronics, till January 27.
August, 2022
The telecom department receives applications from 32 companies which includes 22 MSMEs for the telecom equipment and design production-linked incentive (PLI) scheme.
OCTOBER, 2022
The Ministry of Communication authorizes 42 companies, including 28 MSMEs, for telecom and networking products under the PLI. International firms including Samsung, Nokia, Jabil, Rising Star, Flextronics and local players such as HFCL, ITI, VVDN and Tejas Networks were approved under the scheme.
May, 2023
The Union Cabinet gives its approval for the second edition of the PLI scheme for IT hardware with a Rs. 17,000-crore outlay. It will cover laptops, tablets, all-in-one PCs, servers and ultra-small form factor devices.
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