In order to attract foreign companies to set up their manufacturing unit in the South Asian nation, India has permitted an incentive program worth ₹1.46 trillion, says Finance Minister Nirmala Sitharaman.

The Indian government would provide production-linked incentives to 10 sectors that include solar panel, automobile, and specialty-steel makers over a five-year period, states the Finance Minister post a ministerial panel on Wednesday. However, the textile unit, food processing plants, and specialized pharmaceutical product makers are eligible for this incentive.

She further adds, “This is something that will immediately give greater impetus to manufacturing.”

However, she believes that the plan would further help India to transform into a global manufacturing hub. Also, the new incentive program has been designed by the country’s policy planning body Niti Aayog and uses the template of a program that was implemented earlier this year to attract the attention of businesses away from China.

Close to two dozen companies that include Hon Hai Precision Industry and Samsung Electronics have pledged $1.5 billion to set up their mobile manufacturing unit after India has agreed to pay them an amount equivalent to four to six percent of their incremental sales over the next five years.

Prime Minister Narendra Modi’s government uses this measure to attract investment to revive the country’s economy headed for its deepest annual contraction this financial year.

Alongside, the government has already reduced the corporate taxes to among the lowest in Asia, overhauled insolvency rules, and has eased the foreign direct investment norms to enhance the process of doing business. Narendra Modi has also set a goal to develop the share of manufacturing in the economy of 25 percent from 16 percent currently as part of the ‘Make in India’ program.
N.R. Bhanumurthy, vice-chancellor of Bengaluru Dr. B.R. Ambedkar School of Economics University says, “Achieving share of manufacturing to 25 percent of the economy is certainly imperative to increasing employment opportunities.”