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

The Economic Times - - Pure Politics - Manu.Pubby @times­

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”.

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