The targets set are achievable, but they are predicated upon a variety of factors, the most important of which is the business climate.
The Narendra Modi government’s emphasis on semiconductor production, as evident from a package for the sector, can help India become a global hub for electronics goods. The success, however, will be contingent upon a variety of factors.
The Cabinet this week approved a Rs 76,000-crore programme for the development of sustainable semiconductor and display ecosystem in the country. The programme, a government press release said, “will usher in a new era in electronics manufacturing by providing a globally competitive incentive package to companies in semiconductors and display manufacturing as well as design. This shall pave the way for India’s technological leadership in these areas of strategic importance and economic self-reliance.”
The intention indeed is good, for not just India but the entire world is facing a shortage of semiconductors. After the onset of the Covid pandemic, all countries became aware of the dependence of supply chains on China. The government believes that the new initiative “shall pave the way for India’s technological leadership in these areas of strategic importance and economic self-reliance”.
The programme offers an attractive incentive support to the companies and consortia engaged in manufacturing. These include silicon semiconductor fabs, display fabs, compound semiconductors/silicon photonics/sensors (including MEMS) fabs, semiconductor packaging, and semiconductor design. “Fab” means a manufacturing plant.
A scheme for the setting up of semiconductor fabs and display fabs in India shall extend fiscal support of up to 50% of the project cost on. The Central government will work closely with state governments to establish high-tech clusters with requisite infrastructure in terms of land, semiconductor grade water, high quality power, logistics and research ecosystem to approve applications for setting up at least two greenfield semiconductor fabs and two display fabs in the country, the press release said.
There is another scheme for setting up compound semiconductors/silicon photonics/sensors fabs, and semiconductor ATMP/OSAT facilities in India. Under this a fiscal support of 30% of capital expenditure will be extended to the approved units. At least 15 such units of compound semiconductors and semiconductor packaging are expected to be established with the government support under this scheme.
The Design Linked Incentive (DLI) Scheme will extend product design-linked incentive of up to 50% of eligible expenditure and product deployment linked incentive of 6%-4% on net sales for five years. Support will be provided to 100 domestic companies of semiconductor design for integrated circuits (ICs), chipsets, system on chips (SoCs), systems & IP cores, and semiconductor-linked design. This, the press release says, will facilitate the growth of not less than 20 such companies which can achieve turnover of more than Rs 1,500 crore in the next five years.
The government has also decided to set up an India Semiconductor Mission. It will be led by global experts in the semiconductor and display industry. It will act as the nodal agency for efficient and smooth implementation of the schemes on semiconductors and display ecosystem.
Of the Rs 76,000-crore package, incentive support is of Rs 55,392 crore.
“In the current geopolitical scenario, trusted sources of semiconductors and displays hold strategic importance and are key to the security of critical information infrastructure,” the press release said. “The approved programme will propel innovation and build domestic capacities to ensure the digital sovereignty of India. It will also create highly skilled employment opportunities to harness the demographic dividend of the country.”
The programme will promote higher domestic value addition in electronics manufacturing and will contribute significantly to achieving a $1 trillion digital economy and a $5 trillion GDP by 2025, the release added.
These targets are achievable, but they are predicated upon a variety of factors, the most important of which is the business climate. Owing to the statist mindset, various government organs—both at the Centre and in states—make the lives of businesspersons miserable.
Quite apart from the GST mess, caused mainly because of variable rates, there are regulations and compliances which keep multiplying. Another element that annoys businesspersons is unpredictability. It is evident in not just in the decisions of the Central government but also by states. For instance, after becoming Chief Minister of Andhra Pradesh, Y.S. Jagan Mohan Reddy cancelled all wind and solar power purchase agreements (PPAs).
Such decisions hurt India’s endeavour to attract investment and become a $5-trillion economy.
Then there is the fear of agencies, the Enforcement Directorate and the income tax department. An industrialist can get a few visitations just because his son or daughter posted something nasty about some politician or government.
Unsurprisingly, rich Indians are leaving the country. According to a study by AfrAsia Bank, 7,000 high net worth individuals (HNWIs) left India in 2019. India ranked second in the list of HNWIs leaving their native country; China topped the list.
Government schemes and incentives will help the country become a global electronic hub but a lot more is also needed.