India mulls incentives to lure foreign manufacturers

NEW DELHI: India is planning to offer 324 companies including Tesla Inc and GlaxoSmithKline Plc incentives to set up factories in the South Asian nation in a bid to capitalise on the trade war between China and the United States, according to a document seen by Bloomberg.

The government proposes to provide the manufacturers land to set up a factory along with power, water and road access, according to draft of the document prepared by the Department for Promotion of Industry and Internal Trade and Invest India.

Other companies that officials will reach out to include Eli Lilly & Co, South Korea’s Hanwha Chemical Corp, and Taiwan’s Hon Hai Precision Industry Co.

While the trade war has benefited countries such as Vietnam and Malaysia, rigid land acquisition rules and labour laws have prompted investors to largely ignore India when looking for alternatives to China.

The latest proposal may reduce red tape, and set the nation, which expanded at the slowest pace in six years last quarter, on a path to double its gross domestic product to $5 trillion by 2025 — a goal set Prime Minister Narendra Modi.

“While in the initial leg of relocation we have seen companies moving to Vietnam, I don’t think it is too late for India to start making an effort,” said Sonal Varma, chief economist for India and Asia-ex Japan at Nomura Holdings Inc in Singapore.

“India offers a unique advantage of being a huge domestic market too, so it is definitely an opportunity for the government to attract investment.”

Under the plan, the government will create a land bank for ready-to-move-in industrial clusters, offer investment and location-based incentives and rationalize anti-dumping duties.

The proposal includes incentives for plug-in and hybrid vehicles, fuel efficiency and carbon taxation. For the electronics and telecom sector, flexible employment, manufacturing-related incentives linked to investments and value addition have been sought.

India has made progress, rising 37 spots since 2017 in the World Bank’s ranking for ease of doing business, but it still comes in at 63rd, trailing not only China, but also Rwanda and Kosovo.

At present, investors keen on setting up a factory need to acquire land on their own which, in some cases, involves a time consuming process of negotiating with small plot owners to part with their holding.