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NITI Aayog suggests tax breaks for electronics manufacturing

Govtt's body on policy formulation has suggested some reforms to kick-start electronics manufacturing under ‘Make In India’ scheme

Policy Pulse
Publish Date: Apr 7 2016 12:22PM | Updated Date: Apr 7 2016 12:50PM

NITI Aayog suggests tax breaks for electronics manufacturing

 Aiming world electronics markets with China vacating some space in the sector, government's body on policy formulation has suggested some reforms to kick-start electronics manufacturing under ‘Make In India’ scheme, including tax breaks for big investors and a special coastal zone for production.

 
According to a report in ‘The Economic Times’, in a policy paper on electronics manufacturing, NITI Aayog has said that with a policy shift, India is set to make a dent in world market with high input costs in China but cautions that this is 'perhaps India's last such opportunity'.
 
In policy paper on electronics manufacturing, NITI Aayog has advised that with a policy shift, India is ready to make a dent in the global market with high input costs in China but cautions that this is 'perhaps India's last such opportunity'.
 
It points out that strategy should be export oriented with import substitution to increase production of electronic goods in the short run.
 
The strategy papersuggests that a coastal economic zone (CEZ) be come up under Sagarmala project with international standard infrastructure and and labour laws to start the sector.
"A CEZ may be up to 200 to 250 km wide from the coastline, approximately equal distance in length and encompassing a modern deep dredge port. It would have minimal red tape and relatively flexible labour and land acquisitions laws," NITI Aayog has suggested.
 
In new CEZ, companies investing and creating big employment have been suggested for a massive tax break, besides a suggestion to end the inverted duty structure and ending all taxes on exports. 
 
"A 10-year tax holiday for a firm that invests a substantial sum and generates a large employment within CEZ. For this purpose an investment threshold of US $ 1billion with the employment of 20,000 may be considered," the paper suggests.
 
For import substitution, NITI Aayog has suggested a modification of the preferential market access policy, allowing preference in government procurement, specially in the high value area of defence, for domestic products. The policy organisation has deeply studied the Chinese model and has said that India has an unusual opportunity at hand. "Real wages wages in manufacturing in China have been rising at 10 percent per year since 2007. These increased wages are rendering China uncompetitive in employment intensive activities... firms currently located in China are looking for locations with less expensive labour," it says.