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Can India’s production incentive scheme transform the economy as the SEZ push did for China? -Siddhant Bajpai

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The Indian government will have to take serious note of the structural problems and bottlenecks to work on improving the production-linked incentive scheme.

On December 20, the Indian government approved a Rs 357.17-crore incentive for Foxconn India, under the Production-Linked Incentive scheme for the Large-Scale Electronics Manufacturing sector.

According to government think tank Niti Aayog, Foxconn India is the “first global company” approved under the scheme for mobile phones and to receive an incentive for its manufacturing between August 1, 2021 to March 31, 2022.

This development could help raise foreign investors’ sentiment towards India. More importantly, it could aid the government in clarifying to the global markets that India’s push for self-reliance, or “Atmanirbhar Bharat”, is not protectionism.

There is the hope that the production-linked incentive schemes will transform the Indian economy, similar to the way in which China was lifted by its Special Economic Zones. Established in the 1980s, Special Economic Zones by the 2000s contributed 2% of China’s gross domestic product, 45% of total national foreign direct investment and 60% of exports.

According to the World Bank, Special Economic Zones transformed China’s urban and rural landscape by creating close to 30 million jobs. They also increased the income of participating farmers by 30%, accelerated industrialisation, agricultural modernisation, and urbanisation.

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