Manufacturing matters

Nations across the world have lately been calling for a national review of supply chain vulnerabilities across their respective administrations. The governments would like to see more domestic production. And if in some cases, the governments are required to underwrite the investment via guaranteed federal procurement of supplies, they may not be opposed to it. What governments do to support domestic demand or control supply chains will matter. And those decisions will start to revolve less around simple cost and efficiency calculations, and more around a broad discussion of national competitiveness.

India’s PLI scheme is a step in that direction. It has earmarked ₹1.97 lakh crore and identified 13 sectors to encourage domestic manufacturing, expecting a minimum production of ₹40 lakh crore in five years.

The government having had some success with the mobile phone industry, seeks to duplicate it with the telecom and networking equipment industry. A total of ₹12,195 crore has been earmarked for 10 large companies and 10 selected MSMEs, with an aim to attract investments of ₹3000 crore and spur local manufacturing worth ₹2.4 lakh crore over five years. Nokia, Ericsson, Cisco, Ciena, Jabil, Foxconn, Flex and Indian manufacturers as HFCL, Coral Telecom, Sterlite, VVDN Technologies, and Dixon Technologies have displayed keen interest.

The government has been trying to bring a semiconductor fabrication unit to India for many years now. With it now engaging with companies to understand what kind of incentives are required, 20 semiconductor manufacturing and designing companies have submitted expressions of interest to set up manufacturing plants in India. Over and above the USD 1 billion incentive offered for each chip company, the government is open to increase and customise the incentive amount depending, on the investment the company brings to the country. A couple of large investments worth a cumulative ₹75000 crore for setting up specialty fab units kits in India look plausible.

Historically no country has grown with deep manufacturing capabilities of its own—from Britain to America to China. And in the backdrop of the history of litigation and the trust deficit that the Indian government has, only time will tell how much success comes its way.