Author Sarita Chaganti Singh, Shivhani Acharya
New Delhi (Reuters) -Indian Prime Minister Narendra Modi has decided to let a $ 23 billion program to encourage domestic production, just four years after starting an effort to get companies away from China, according to four government officials.
The scheme will not expand outside the 14 pilot sector, and the production deadlines will not expand despite the requirements of some participating companies, two officials said.
About 750 companies, including Apple FoxConn and Indian Conglomerate Reliance Industries, have applied to the production initiative, according to public records.
The companies have promised the payment of funds if they fulfill individual goals of production and deadlines. She hoped to increase the share of production in the economy to 25%by 2025.
Instead, many companies that participated in the program failed to start production, while others who filled out production goals found that India was slowly paying subsidies, according to government documents and a correspondence seen by Reuters.
Since October 2024, companies that participated in goods worth $ 151.93 billion within the program, or 37% of the goal that Delhi set, according to the undated analysis of the program compiled by the Ministry of Trade. India issued only $ 1.73 billion incentives – or below 8% of allocated funds, the document states.
The news of the Government’s decision not to expand the plan and specifics of the payment of payment, Reuters first reports Reuters.
Modi’s office and the Ministry of Trade, which oversee the program, did not respond to the commentary requests. Since the introduction of the plan, the production share in the economy has decreased from 15.4% to 14.3%.
FoxConn, who now employs thousands of contracting workers in India, and has not returned the religions for comment.
Two government officials told Reuters that the end of the program did not mean that Delhi had left his production ambitions and that alternatives were planned.
The government defended the impact of the program last year, especially on pharmaceutical products and the production of mobile phones, which recorded explosive growth. About 94% of almost $ 620 million incentives paid between April and October 2024. It is focused on these two sectors.
In some cases, some companies in the food sector that have signed up for subsidies have not issued them because of factor such as “not compliance with the investment thresholds” and companies “that do not achieve minimal growth”, according to the analysis. The document did not provide specifics, although it found that the production in the sector had exceeded the goals. Reuters could not determine what companies related to.
But Delhi had previously recognized the problems and agreed that he would expand some deadlines and increase the incidence of payment after the complaints of PLA participants. One of the Indian officials who spoke on the condition of anonymity to discuss confidential things, he said that excessive bureaucratic and bureaucratic caution continued to reach the efficiency of the scheme.
As an alternative, India considers support to certain sectors partially compensated for the investment made to install the plant, which would allow companies to recover the costs faster than they have to wait for production and sale, another official said.
Trade expert Biswajit Dhar of the Council based in Delhi for the scientific development of social development, who said that Modi’s government should do more to attract foreign investment, said the country may have missed its moment.
The incentive program was “maybe the last opportunity that we had to revive our production sector,” he said. “If this type of mega-shame fails, do you expect anything to succeed?”
Standing production comes while India tries to bypass the trade war released by US President Donald Trump, who criticized Delhi’s protectionist policy.
Trump’s threat to reciprocal tariffs to countries like India that have a trade surplus with the US means that the export sector is increasingly challenged, Dhar said. “There was a little tariff protection … and all that would be reduced.”
Hits and misses
The program was introduced at a convenient time for India: China, which has been a worldwide factory floor for decades, struggled to maintain production in the midst of Beijing’s policy without an covide.
The United States also sought to reduce their economic reliance on the increasingly assertive Beijing, which encouraged many multinational companies to continue the policy of diversification of “Kina Plus one” production lines.
With its large youthful population, lower costs and a government that is considered relatively friendly to the west, India seemed to benefit.
In recent years, India has become a global leader in the production of pharmaceutical and mobile phones.
In the fiscal year, the Earth has produced $ 49 billion in 2023-24 worth $ 49 billion, which is 63% compared to 2020-21, according to government data. Industry leaders like Apple now produce their latest and most sophisticated cell phones in India after starting with cheap models.
Similarly, pharmaceutical exports almost doubled to $ 27.85 billion in $ 2023-24 a decade ago.
But success is not repeated in other sectors, which include steel, textiles and production of solar plates. India faces the fierce competition of cheaper rivals like China in many of these fields.
In the solar industry, for example, eight of the 12 companies that have applied for PLA are unlikely to fulfill its goals, according to the analysis of the sector sector in December 2024, prepared by the Ministry of Renewable Energy sources and saw Reuters. Eight companies involved the units of Reliance, Adani Group and the Indian JSW conglomerate.
The analysis found that the subject of the Reliance will satisfy only 50% of the production goal that was set to end the fiscal year in 2027, when the solar PLA scheme will expire. He also said that Adani did not order the equipment he needed to produce solar panels and that JSW had not “done anything” yet.
JSW refused to comment, until Adani answered questions.
In January, the Ministry of Store said a letter to the Ministry of Renewable Sources, which saw Reuters that he would not agree to the request of his colleague to expand the scheme after 2027, as this would “result in the dishonest benefit of non-parforms”.
The Ministry of Renewable Sources was said in response to Reuters’ questions that it was dedicated to “righteousness and responsibility”, as well as “securing the award only those who fulfill their goals.”
In the steel sector of investment and production, goals are also lagging behind. Fourteen of the 58 projects approved for Plis has been withdrawn or removed due to lack of progress, according to undated analysis on the entire program.
($ 1 = 86.4425 Indian Rupees)
(Reporting Shivangi Acharya and Sarita Chaganti Singh; Mounting Attab Ahmed and Katerina Ang)
