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India to Invite Mega Solar Manufacturing Factories using Incentives but will it Succeed?

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In its recent annual budget, the Indian government announced that it would soon unveil a new policy to invite foreign manufacturers to set up large factories in India for the manufacturing of semiconductor products, batteries, solar cells as well as EVs. These incentives would also include income tax exemptions amongst other incentives.

Note India’s “Make in India” policy has failed over the last five years as India’s manufacturing share of GDP has barely budged since the problems with land and labor make investors reluctant to invest in India. Logistics and red tape are additional hurdles that manufacturers face while making in India. On top of that, you have very high interest rates as compared to other Asian countries. Given these numerous handicaps, most investors prefer to set up factories in China and other southeast Asian countries where the policies and regulations are much more favorable.

While India has made a number of announcements, the execution has been pathetic as the structural issues are not getting solved. Buying or leasing land remains as hard as ever while the archaic laws of labor make it difficult to get good talent. The recent budget announcement is welcome that it shows the intent of the government to push for mega manufacturing clusters which can give an impetus to the economy in terms of investment and jobs. However, until the serious structural reforms take place, India will find it hard to attract investment.

The government of India has tried in the past to set up a semiconductor industry by giving capital subsidies. But the plans of players like ST Microelectronics, Infineon and others remained on paper only. The billion-dollar investments never arrived and India now imports billions of dollars of electronics and semiconductor components each year. Same is the case with solar panels. And unless a miracle happens, this will repeat in the case of batteries and Electric Vehicles as well.

PG

Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to greensneha@yahoo.in

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