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Govt eyes Make in India push for electronics to curb forex outflow

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Mumbai :’The government expects demand for electronic products to reach $400 billion by 2023-24. This would be a huge foreign exchange outflow, which may further widen our trade deficit with other nations. Hence, the government plans to push local electronics manufacturing to cut down on their import bill.’

India should have specific benchmarks on direct tax on the lines of China and Vietnam if it wants to create a globally competitive electronics industry, the India Cellular & Electronics Association has said.

The electronics body has suggested that verticals other than mobile phones should also be given a push.

 

‘The new draft policy touches upon the industry pain points and attempts to address them’

The ministry of electronics and IT has released a draft electronics policy, which aims to create a $400 billion turnover in the electronics manufacturing ecosystem by 2025. However, as the majority of the amount is linked to mobile phones, experts feel that momentum should be created in other verticals also.

“The draft policy recognises the progress made in the mobile phone and related component ecosystem in the last three years. It lays down almost complete responsibility of achieving $400 billion by 2025 on mobile phones and components. We have to create a huge momentum in other verticals also while consolidating the mobile phones segment and that is a correction which has to be made,” chairman of ICEA Pankaj Mohindroo told Business Standard.

He further said the government needs to benchmark more specifically in direct taxes with geographies like Vietnam and China. “We cannot establish a globally competitive electronics industry without these benchmarks,” he added.
In the draft policy, the government has proposed to provide suitable direct tax benefits for setting up a new manufacturing unit or expansion of an existing unit.

The policy also proposes to promote a forward looking and stable tax regime, including advance intimation to the industry to plan investments in the form of phased manufacturing programme in various segments of electronics, with a sunset clause.

‘We have to create a huge momentum in other verticals also while consolidating the mobile phones segment’
It has also been recommended to increase income tax benefits on expenditure incurred on research and development in the electronics sector.

However, of the $400 billion turnover in the electronics manufacturing ecosystem, $190 million is slated to be achieved from mobile phones. The proposed policy aims to double the target of mobile phone production from 500 million units in 2019 to one billion by 2025 so as to meet the objective.

According to the draft, the government plans to end the modified special incentive scheme with plans that it will find easier to implement such as interest subsidy and credit default guarantee, among others.

Modified special incentive package scheme (M-SIPS) was launched in 2012 and provided for capital subsidy of 25 per cent for the electronics industry located in the non-SEZ area and 20 per cent for those in the SEZ areas.

“The government expects demand for electronic products to reach $400 billion by 2023-24. This would be a huge foreign exchange outflow, which may further widen our trade deficit with other nations.

“Hence, the government plans to push local electronics manufacturing to cut down on their import bill,” said Hanish Bhatia, senior analyst, Devices & Ecosystems, Counterpoint Research.

Production of mobile handsets, TVs and LED products (such as light bulbs) has gone up significantly in the recent past, primarily due to adoption of a robust duty structure in conjunction with PMP and incentivisation of local manufacturing through schemes such as M-SIPS.

“The new draft policy touches upon the industry pain points and attempts to address them. For instance, exemption of duty and easier passage on capital equipment/machinery in India will encourage global firms to set up their manufacturing operations in India. Similarly, the government wants to boost the component supplier ecosystem by incentivising via investment-linked deductions and subsidies,” Bhatia said.

The government also wants to make India an export hub for electronics goods, targeting African and SAARC nations as key markets.


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Cabinet clears setting up of centralised GST appellate authority

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New Delhi: The Union Cabinet on Wednesday approved setting up of a centralised Appellate Authority for Advance Ruling (AAAR) under the goods and services tax that would decide on cases where there are divergent orders at the state level.

The setting up of a centralised AAAR would require amendments to the GST Acts. The centralised authority as an appellate body will only take up cases wherein the Authority for Advance Ruling (AAR) of two states have passed divergent orders.

The Goods and Services Tax (GST) Council, headed by Finance Minister Arun Jaitley, and comprising state counterparts, in December decided to establish the centralised AAAR.

 

“The Cabinet has cleared the GST appellate authority,” a source said after the meeting of the Cabinet headed by Prime Minister Narendra Modi.

In view of the confusion created by contradictory rulings given by different AARs on the same or similar issues, the industry had been demanding a centralised appellate authority that could reconcile the contradictory verdicts of different AARs.

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Urbanisation to be big driver of Indian economic growth: Kant

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Davos: Urbanisation will be a big driver of economic growth in India going forward, supported by favourable macroeconomic factors, accelerated infrastructure building and continuing reforms, NITI Aayog CEO Amitabh Kant said.

Speaking here at an event on sidelines of the World Economic Forum Annual Meeting, he also said the Indian economy may even exceed the IMF growth forecast of 7.5 per cent for the country.

Kant said IMF has forecast 7.5 per cent growth for India despite a gloomy outlook for the global economy and this itself is good, though there are expectations that this estimate would be surpassed. He said India is giving a big push to urbanisation with more than 100 smart cities being developed.

 

The country is also using technology in a big way to change the way business and governance is done, he added. Besides a massive infrastructure building is happening, bank credit flow has rebounded and macroeconomic factors like inflation and fiscal deficit are also being supportive, Kant said.

DIPP Secretary Ramesh Abhishek noted that states are competing with each other to attract investments and all political parties have adopted the economic reform process. He listed various reform initiatives undertaken in India, including on areas like ease of doing business, FDI, manufacturing and taxation.

They were speaking at Institutional investors’ breakfast roundtable, organised by the industry chamber CII and Kotak Mahindra Bank. Other participants included CII Director General Chandrajit Banerjee and leaders from Indian and foreign companies.

On questions about some persisting issues in doing business including on tax and insolvency related issues, Abhishek said a lot of efforts have been put in to remove all bottlenecks and starting a business doesn’t take more than a day. Besides, special provisions have been made for startups and angel investors, he added.

Kant said efforts are also being made to remove all physical intervention and digitise the entire process of inter-ministerial and inter-department consultations to fast-track the decisions.

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India will surpass China, says Raghuram Rajan

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Davos: India will eventually surpass China in economic size and will be in a better position to create the infrastructure being promised by the Chinese side in South Asian countries, former RBI Governor Raghuram Rajan said.

Addressing a session on Strategic Outlook for South Asia, Dr Rajan said that the Indian economy would continue to grow while growth rate is slowing down in China.

“Historically, India had a bigger role in the region but China has now grown much bigger than India and has presented itself as a counter-balance to India in the region,” Dr Rajan said at the WEF Annual Meeting 2019.

 

“India will become bigger than China eventually as China would slow down and India would continue to grow. So India will be in a better position to create the infrastructure in the region which China is promising today. But this competition is good for the region and it will benefit for sure,” he said.

The comments assume significance with China working on a lot of infrastructure projects across the region. In 2017, India became the sixth largest economy with a GDP of $2.59 trillion while China was the second large with a GDP of $12.23 trillion.

At the same session, Nepal PM K.P. Sharma Oli cited collaboration with China as well as India as reasons for the economic growth.

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