India approved an incentive program worth Rs 1.46 trillion ($20 billion) to attract companies to set up manufacturing in the South Asian nation, Finance Minister Nirmala Sitharaman said.
The government will offer production-linked incentives to 10 sectors including automobile, solar panel and specialty-steel makers over a five-year period, she said after a meeting of a ministerial panel on Wednesday. Textile units, food processing plants and specialized pharmaceutical product makers are also eligible for the incentives.
“This is something that will immediately give greater impetus to manufacturing,” Sitharaman said.
The plan will help India become a global manufacturing hub, she added. The incentive program, mooted by the country’s policy planning body Niti Aayog, uses the template of a program implemented earlier this year to draw businesses away from China.
About two dozen companies including Samsung Electronics Co. and Hon Hai Precision Industry Co. pledged $1.5 billion to set up mobile-phone factories after India offered to pay them an amount equivalent to 4%-6% of their incremental sales over the next five years.
Attracting investments is key for Prime Minister Narendra Modi’s government to revive an economy headed for its deepest annual contraction this financial year.
His government has already cut corporate taxes to among the lowest in Asia, overhauled insolvency rules and eased foreign direct investment norms to improve the ease of doing business. Modi set a goal to grow the share of manufacturing in the economy to 25% from about 16% currently as part of the so-called ‘Make in India’ program.