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India to Introduce a Stimulus Plan to Reward Domestic Products

Although it does not seem that the tension on the border between China and India will ease up anytime soon, the trade relationship between the two countries is improving. After falling to second place for two consecutive years, in 2020, China once again become India’s largest trading partner and the U.S. became the second largest. However, the Indian government is concerned about China’s huge trade surplus with India.

On Wednesday, February 24, India approved an incentive plan to reward the use of domestic high-tech products. It is expected to spend US$1 billion to encourage domestic companies to increase the production of laptops, tablets and other products. India hopes that this move will diversify its products and reduce its dependence on China. At the same time, it will enable India to be self-sufficient in the electronic field and grow to be a top global supplier in the future.

The Indian Mobile Phone and Electronics Association and Ernst & Young released a research report in November 2020. According to the report, 80 percent of laptops and two-thirds of tablet computers sold in India are imported from China. However, in the mobile phone market, India has achieved a more successful transition. Before 2014, the market share of imported smart phones was 78 percent, but this number has now dropped to 8 percent.

The incentive plan includes the distribution of cash subsidies of up to 4 percent of the company’s revenue for four years starting in April this year.

The Indian government has started discussions with Apple and Hewlett-Packard on stimulus measures. According to media reports, Apple is interested in participating in the incentive program. Apple has not established a production line in India as of yet, but its supplier, Taiwan’s Hon Hai Group, has invested US$100 million to build a factory in southern India. Hewlett-Packard also has a branch in India.

At a press conference on Wednesday, India’s Minister of Electronics and Information, Ravi Shankar Prasad, stated that the focus of this incentive program is to “to bring the world’s top five global champions to India and produce for the world.”

Due to the impact of COVID 19, the Indian economy is in urgent need of recovery. India’s GDP shrank by 15 percent in 2020. For its size, India has the worst economy  in the world.

Source: Deutsche Welle, February 25, 2021