Some months after the guidelines were first unveiled, India’s Union Cabinet has given clearance – in principle – to the application of the Production Linked Incentives (PLI) scheme to telecommunications and networking products.
This incentive scheme will involve some major handouts to the sector, with about Rs 12,195 crore (approximately $1.64 billion) supporting the scheme over the next five years, according to local press reports.
The initial response to the scheme – at least locally – has been good, with those in favour suggesting that it will increase local manufacturing, exports and jobs, and that it will incentivise investments from foreign countries.
This move follows the roll-out of similar schemes for the electronics and mobile phone manufacturing sectors earlier this year. India announced plans to ramp up incentives for these sectors in early June, and there’s no doubt that the smartphone manufacturing market recorded enormous growth in Q3. However, this may be because of pent-up post-lockdown demand rather than PLI.
As for the PLI scheme for telecommunications and networking products, the hope is that it will boost the domestic production of telecommunications equipment and reduce the country’s dependence on Chinese suppliers. However, whether the scheme will overcome the manufacturing cost disadvantage for vendors siting their factories in India (a problem we mentioned in August) is not clear.
State-run Indian Telephone Industries Limited, Sterlite Technology, Tejas Network, and Himachal Futuristic Communications Ltd are some of the domestic players involved in the manufacturing of telecommunications equipment. Nokia and Ericsson also have factories in India.
According to Indian press reports, Nokia is now ramping up 5G exports from its factory and is also evaluating optics and transport equipment manufacturing.