NITI Aayog Moots Tax Breaks for Electronics Mfg
Policy body moots preferential buying by govt; end to inverted duty structure and creation of mega coastal economic zone under Sagarmala project
GOING GLOBAL NITI Aayog has suggested that with a policy shift, India is poised to make a dent in the global market with high input costs in China
New Delhi: Seeking to capture world electronics markets with China vacating some space in the sector, the government’s key body on policy formulation has suggested a series of reforms to kick-start electronics manufacturing under the Make In India initiative, including tax breaks for big investors and a special coastal zone for production.
In a new policy paper on electronics manufacturing, NITI Aayog has suggested that with a policy shift, India is poised to make a dent in the global market with high input costs in China but warns that this is ‘ perhaps India’s last such opportunity’. It argues that the strategy should be export oriented with import substitution to expand production of electronic goods in the short run.
The strategy paper, a copy of which was accessed by ET, suggests that a mega coastal economic zone (CEZ) be set up under the Sagarmala project with international standard infrastructure and flexible land acquisition and labour laws to kick-start the sector. “A CEZ may be up to 200 to 250 km wide from the coastline, approximately equal distance in length and encompassing a modern deep dredge port. It would have minimal red tape and relatively flexible labour and land acquisitions laws,” NITI Aayog has suggested. Within the new CEZ, compa- nies making large investments and creating big employment have been recommended for a massive tax break, besides a suggestion to end the inverted duty structure and ending all taxes on exports. “A 10-year tax holiday for a firm that invests a substantial sum and generates a large employment within CEZ. For this purpose an investment threshold of $1 billion with the employment of 20,000 may be considered,” the paper suggests.
For import substitution, NITI Aayog has suggested a modification of the preferential market access policy, allowing preference in government procurement, specially in the high value area of defence, for domestic products.
The policy organisation has deeply studied the Chinese model and has said that India has an unusual opportunity at hand. “Real wages wages in manufacturing in China have been rising at 10% per year since 2007. These increased wages are rendering China uncompetitive in employment intensive activities…firms currently located in China are looking for locations with less expensive labour,” it says, arguing that India should not even shun away from low value addition production as massive production orders in the sector “translates in a large total value addition and large number of jobs”.