Ever since Apple took up the PLI scheme to shift some part of its manufacturing to India, there is a clear shift in the mood amongst contract manufacturers
There was a time when India wasn’t even a spec on Apple’s global marketing radar all of its flagship products arrived on our shores as an afterthought. However, today things have changed drastically with Apple pretty much sounding the bugle for India’s march towards capturing a larger slice of global manufacturing exports.
The Cupertinho-based tech giant not only created 150,000 direct and indirect jobs in the country since August 2021, but also caused India’s handset exports to rebound strongly. In fact, to such an extent that the numbers for 2022-23 could well be headed beyond the $9 billion mark. All because, Apple and Tim Cook believed in India’s production-linked incentive (PLI) scheme and they wanted to hedge their risks of having their entire supply chains in China.
Govt seeks to strengthen the bonds
Looks like the bond between Apple and the government could get strengthened soon. A report published by ToI quotes officials to suggest that the the PLI scheme could soon be enhances to get Apple to start manufacturing MacBooks, iPads and even AirPods in India. Towards this end, the government may hike the PLI spends for IT equipment to Rs.20,000 crore from Rs.7350 crore as it stands today.
The article quoted to IT ministry officials to suggest that the government wants the Apple ecosystem to grow in India so that it moves ahead of its stated China-Plus One strategy for global product sourcing and supply chains. The report says the plan is currently under review with the Finance Ministry and other nodal ministries.
The government had approved the PLI proposal in February 2021 guaranteeing between one to four percent incentive support for four years. The new scheme seeks to enhance this to five per cent. Additionally, laptops come under the ITA-1 which makes imports duty-free, unlike smartphones which has a 20% import tariff attached.
However, Apple has its own challenges
Of course, it remains to be seen whether Apple actually bites. There is the issue of keeping China at bay as antagonising them could result in trouble for the company at this juncture when the country continues to be its biggest production hub. Then there is also the question of Apple finding it tough to set up a strong supplier base in India, given the chipset challenges as well as the Sino-India political tensions.
It is another matter that government could well be using Apple as its poster boy to lure others such as samsung, HP and Dell to set up manufacturing base in the country. Samsung already has a presence in India though it is quite well known that inducing a structural shift in global supply chains is far tougher to accomplish.
A key challenge needs to be solved through tapping Chinese vendors, something that the centre has been averse to since the Galwan clashes of 2020 between the two armies. Setting up a supply chain locally would require some of these Chinese companies to return with some hard cash to set up infrastructure. And this would require policy-level support from India.
That India is making a concerted effort at a time when the global economic headwinds are far from robust could be a blessing in disguise. There’s been a lot of talk about India being one of the economies that could withstand the onset of recession and creating more manufacturing opportunities could just be the way to do it.
After all, India as a market continues to be lucrative to global brands and once government can push the agenda on local manufacturing through supportive policy frameworks, there is no reason why some of the big names won’t see India as an option, given its talented labour pool and skilled resources.