India introduces a $2B program to boost local IT hardware production

India wants to be a bigger player in the global hardware manufacturing industry, and it sees a route to boosting local economies while doing so. Now, it’s putting some money where its mouth is. The country has announced a $2 billion program designed to promote and incentivize businesses locally building hardware like laptops, PCs, servers and related edge computing kit.

On Wednesday, India’s IT minister Ashwini Vaishnaw announced that the Union Cabinet approved the new scheme with a budgetary outlay of over $2.06 billion (17,000 crores Indian rupees). The initiative, which is called the Production-Linked Incentive Scheme, is focused on spurring local production, by offering cash awards based on a sliding scale linked to sales of the hardware being produced.

The program will run for six years and is expected to attract investments of $295 million and incremental production of $40.7 billion. It will also generate roughly 200,000 jobs — 75,000 direct and the rest indirectly — the minister said at a press conference.

India’s moves come at a time when the country — the second biggest country in the world, and one of the most lucrative for consumer electronics — is still a net importer of hardware, largely from China. More recently, it has been chipping away at an opportunity to leverage some of its own size and technical expertise to compete with China on the electronics manufacturing front.

The scheme announced today has not been without its headaches, though.

For starters, it has been in the works for years already, but the original incarnation had been delayed due to low interest, reportedly because manufacturers — who were already producing hardware in China — didn’t see enough of a financial incentive to invest in moving to India.

Originally, when the Indian government announced the incentive program for IT hardware production in March 2021, it had a total budget outlay of $892 million tied to attracting investments of up to $303.5 million. The revised scheme announced today has bumped up the budget outlay to more than twice as much, while reducing the overall demand for outside investment to be eligible for the offer.

The fact that the Indian government has budged on those two numbers is, on one hand, a sign of current, tougher economic times: This can help kickstart local economies at a time when the world feels like it is teetering on economic stagnation or even recession (and in some of the toughest geographies and demographies, collapse). On the other hand, it underscores the opportunity that India sees in becoming a hardware net exporter, at a time when many are looking to usurp that crown from China.

“Today, that environment is there in the country. Today in India, there is a good policy framework, very proactive government,” said Vaishnaw in his press remarks. “And, of course, the global situation is also supporting us, and the ecosystem has got created. So, all these factors are supporting this [scheme].”

The scheme announced today will sit alongside similar efforts India has established to boost electronics and telecom equipment manufacturing. The government also separately offers some $6.6 billion in incentives to manufacturers producing smartphones in the country. Companies such as Samsung and Foxconn, Wistron and Pegatron — who all work with Apple — have applied for the smartphone incentive program.

India Cellular and Electronics Association (ICEA), which counts Apple, Samsung and other key device makers as its members, believes that the new scheme will help expand IT hardware exports from India.

“We currently import a significant portion of our laptops and tablets for consumption,” said Pankaj Mohindroo, chairman of ICEA, in a prepared statement. “This revised PLI scheme will not only foster domestic manufacturing but also likely benefit major global manufacturers of IT hardware products such as laptops and tablets. We urge the global industry to acknowledge this and consider India as a crucial destination for manufacturing IT hardware products.”

Over the past eight years, electronics manufacturing in the South Asian nation has experienced a yearly growth rate of 17%, reaching a total value of $105 billion. The country has become the second largest manufacturer of mobile phones after China, with exports of mobile phones surpassing $11 billion this year, per government data.