India Lures Big Names With Subsidy Program


FEBRUARY 09, 2015

General Electric and Nidec are among companies looking to take advantage of a subsidy India is offering for electronics manufacturing amid Prime Minister Narendra Modi's push to boost economic growth.

The government has received at least 60 applications, with about half of them approved, for a subsidy of as much as 25 percent on capital investment, Ajay Kumar, joint secretary in the Department of Electronics and Information Technology, said in an interview in New Delhi. More than 40 submissions were made after Modi took office in May, he said.

While the incentive was introduced by the previous government, the number of proposals is accelerating as Modi takes steps including allowing more foreign direct investment in industries such as railways to boost economic growth. He has made a push for local manufacturing to create 100 million new factory jobs by 2022 and the government is implementing an $18 billion program known as Digital India to expand high-speed Internet access and offer government services online.

"The subsidy is a very good investment scheme that existed before Modi, but it wasn't marketed very well," Sunil Kumar, compliance officer at Nidec's Indian unit, said by phone. "The government machinery is functioning better than before."

Nidec, a Kyoto-based maker of precision components that has been approved for the subsidy, will begin making electronic motors in the state of Rajasthan in the next two months, Kumar said, declining to provide investment figures. It's among applicants with proposals to spend more than 1 billion rupees ($16 million), according to the government.

GE's health-care business, which has three factories in Bengaluru, the city formerly known as Bangalore, has applied for the subsidy in the last couple of months, Manoj Menon, a spokesman for the company in India, said without providing details. The Fairfield, Connecticut-based company makes medical imaging machines at its factories in the southern Indian city.

India introduced incentives in July 2012 for new projects and for expansion in electronics manufacturing in industries such as telecommunications, automobiles, medical and semiconductors. It started accepting applications for subsidies from August 2013, said Kumar at the Department of Electronics.

"Suddenly with the emphasis on Digital India, electronics makers know there'll be more demand for their products," said Kumar. "Now, practically on a weekly basis applications come in."

Jabil Circuit, the maker of electronics for Apple that got approval for its investment proposal in June, plans to double its revenue from a factory in the western city of Pune making products including television set-top boxes, Sunil Naik, operations manager at the India unit, said by phone. The St. Petersburg, Florida-based company, which plans to invest as much as $20 million, has already spent $6 million.

Still, businesses in India face power shortages, a byzantine tax system and local regulatory requirements that can vary from state to state. India ranks 142nd on the World Bank's "ease-of-doing business" index, below Uzbekistan and 10 places lower than Ethiopia.

The manufacturing incentive program provides a subsidy for capital spending investments of 20 percent for projects in special economic zones and 25 percent for those located elsewhere in the country.

The incentives are available for investments made in a project within a period of 10 years from the date of approval, according to details of the program posted on the department's website.