Govt plans incentives for foreign manufacturers
NEW DELHI: Government is planning to offer 324 companies including Tesla Inc and GlaxoSmithKline Plc incentives to set up factories in India in a bid to capitalise from the trade war between China and the US, according to a document seen by Bloomberg.
The government proposes to provide the manufacturers land to set up a factory along with power, water and road access, according to draft of the document prepared by the department for promotion of industry and internal trade and invest India. Other companies that officials will reach out to include Eli Lilly & Co, South Korea's Hanwha Chemical Corp, and Taiwan's Hon Hai Precision Industry Co.
While the trade war has benefited countries such as Vietnam and Malaysia, rigid land acquisition rules and labor laws have prompted investors to largely ignore India when looking for alternatives to China. The latest proposal may reduce red tape, and set the nation on a path to double its gross domestic product (GDP) to $5 trillion by 2025.
"While in the initial leg of relocation we have seen companies moving to Vietnam, I don't think it is too late for India to start making an effort," said Sonal Varma, chief economist for India and Asia-ex Japan at Nomura Holdings Inc in Singapore. "India offers a unique advantage of being a huge domestic market too, so it is definitely an opportunity for the government to attract investment."
Under the plan, the government will create a land bank for ready-to-move-in industrial clusters, offer investment and location-based incentives and rationalise anti-dumping duties. The proposal includes incentives for plug-in and hybrid vehicles, fuel efficiency and carbon taxation. For the electronics and telecom sector, flexible employment, manufacturing-related incentives linked to investments and value addition have been sought.
The country has made progress, rising 37 spots since 2017 in the World Bank's ranking for ease of doing business, but it still comes in at 63rd. The Prime Minister's Office is considering the proposal and a decision is expected soon. An email sent to the spokeswoman at the commerce and industry ministry wasn't immediately answered.