“Fiscal policies of the Government as an enabler to the “Make in India” initiative and way forward
How is the government of India playing an enabler's role in taking the ‘Make in India’ initiatives forward? To discuss this and more, KPMG presents 'The Blueprint: Business In The New Normal' wherein industry experts such as Bill Blair, VP & Chief Executive at Lockheed Martin India Pvt Ltd; Gyanesh Chaudhary, Vice Chairman and Managing Director at Vikram Solar; Josh Foulger, MD at Bharat FIH Limited; and Gaurav Mehndiratta, Partner and Head of Corporate and International Tax at KPMG in India have shared their respective views.
Impact of initiatives on driving manufacturing in India and the effect they are having
More than three decades have passed since India's economy was liberalised, and the country has seen tremendous change in that time, with the goal now of becoming a global manufacturing hub if the target of becoming the third-largest economy in the world by 2029 is to be met. To that effect, the production-linked incentive scheme for 15 sectors amounting to 26-billion-dollars to make India Atmanirbhar or self-reliant that takes centre stage to drive up India’s production capabilities.
Why then are these incentives so critical for these sectors? Sharing his thoughts, Mr. Mendiratta said, "Since 2014, ‘Make in India’ has been a pillar for India's progress going forward. The last few years have witnessed a thrust and an all-around attack on the fiscal policy. The first one is the 15% corporate tax rate, which is one of the best in the world, has been offered to companies who want to get into manufacturing and start commercial production by 2024.
The other notable Central Government initiative that has been attracting investments to the tune of Rs.1.98 lakh crores in 13 sectors is the PLI scheme. Moreover, there has also been a Rs 75,000 crore investment in the semiconductors and fire manufacturing space, and this is yet another massive step taken by the central government. Even from the state-level perspective, several of them are vying for more investments by offering incentives like capital subsidy, investments in plant and machinery, electricity, and duty revision to promote Make in India."
On the demand side as well, the government has come up with a public procurement order whereby the procurements done by them, or their public-sector undertakings, have to go through companies that have certain value-addition norms. In the defence sector, for example, 400 items that were earlier imported have been reserved for production in India.
Insight Into the Electronics ecosystem
This trend has spread to the states, which are now engaged in a healthy rivalry with one another. The state of Maharashtra has established Mumbai as India's financial centre, and the state of Tamil Nadu has established itself as the automobile and electronics powerhouse.
India wants to play a pivotal role in the electronics industry's global value chain so that it can meet the needs of consumers all over the world. Smartphones produced in India have experienced a meteoric rise. To what extent fiscal incentives are going to drive this electronics ecosystem forward? Sharing his thoughts, Josh said, "For India, there is a great attraction for engineering jobs. India offers exceptional operational excellence which is important while looking at global value chains. The PLI scheme is a great start for the government, and the first disbursements have already started. The face manufacturing program for mobile phones and EVs has also been a great starter to reach out to markets beyond India. Lastly, having strategic FTAs with good partners in importing countries is key."
Impact of incentives on the solar ecosystem
Vikram Solar's meteoric rise mirrors the transformation in India's solar ecosystem, which has led to the country becoming the third-largest installer of solar power in the world at 62 GW. What role will incentives play in getting us to our solar targets? Mr Gyanesh furthers his comments by saying, "India has taken leaps and bounds of progress with respect to renewables. The greatest motivation is to save the planet, which is why solar panels are becoming increasingly popular. In the post-COVID-19 era, India's leadership has come to terms with the fact that the country can't rely on steady imports from its neighbours. The solar industry's production landscape shifted dramatically in June after India announced a historic 40% customs charge. It also sent a message to the rest of the world that India can produce its goods independently. These plans have sparked massive manufacturing, investment, and economic expansion."
Impact of incentives on the defence system
Mr Bill discussed the role that incentives play in the local and international defence value chain and India's position. He remarked, "India has come a tremendously long way in terms of being self-reliant and evolving the “Make in India” initiative. When you look at the level of indigenous content that we’ve created, at the subset level, there has been great progress. Our difficulty is figuring out how to implement this across the entire platform."
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