What makes India an irresistible investment destination for large Corporations & What are Production-Linked Incentive Schemes and How Will They Improve India’s Manufacturing Capacity?

By Indonomics Consulting Private Limited – Ritesh Kumar Singh

ICPL specialises in research and advisory with respect to opportunities and risks of doing business in India. It focuses on regulations.

Market size

5th largest economy: US$ 3.469 trillion (estimated GDP 2022)

US$ 11.665 trillion at PPP basis

China (US$ 18.32 trillion; US$ 30.07 trillion at PPP basis)

Low per capita yes, but it still has over 50 million affluent households with annual income of US$20000/annum – a major draw for sellers of discretionary goods and services

Growth outlook: 6.5% – 7% compared to China at 3% or ASEAN <6%

A large and steadily growing domestic market of 1.4 billion people and highly diversified industrial base vis-a-vis countries such as Vietnam, that increases India’s relative attractiveness as an investment destination.

That relative attractiveness will further improve if India concludes its FTAs with the EU, GCC, Russia-led Eurasian Region and UK

Relatively cheaper labour plus ample supply of English speaking engineers and other skilled workers

Taxation and subsidies

Competitive corporation tax rates: 26%, and for new manufacturers, it’s 17%

PLI  subsidies  to  promote  manufacturing4-12%  of incremental output

Favourable  geopolitical  environment  when  all  kinds  of countries and corporations wants to cut their China exposure and looking

Top  PLI  manufacturing  sectors  to  explore:  (criteria  – domestic sales as well as export sales potential)

Electronics hardware including mobile phones and laptops Pharmaceuticals: APIs and KSM (Key Starting Materials) Food processing, Automotive, White goods

Sectors not covered by PLI yet possess high potential for investors:  Infrastructure  (roads,  ports,  airport  ports  to warehousing),  real  estatehealthcarehospitality  and tourism,  and  not  only  banking  and  finance,  fintech  or ecommerce.

Key recommendation: The focus of top investors is on high margin premium products and services – consumed by affluent Indian households.

However, in my view, a much larger and “largely untapped” opportunity exist in “low margin-high volume” products and services starting from homes, hospitals and hotels to bikes, cars, SUVs and white goods.

Major challenge: Navigating India’s opaque and control freak bureaucracy.

For details on PLI:

https://www.india-briefing.com/news/what-are-production-linked-incentive-schemes-and-how-will-they-build-up-indias-manufacturing-capacity-23538.html/

 

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