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Indian hi-tech sectors could attract $21bn investment

India’s high-tech sectors could potentially attract US $21 billion in investments and create millions of jobs over the next five years.

In a recent report, titled “Hi-tech Manufacturing in India”, submitted to the Indian government, the US-India Strategic and Partnership Forum (USISPF) said the country’s high-tech sectors can create 550,000 direct jobs and 1,400,000 indirect jobs in the next few years.

News reports have said the study is based on the feedback received from top American companies in this sector interested in investing in India.

According to the USISPF president, India’s high-tech sectors (such as electronics, aviation, and medical devices) have the potential to offer an additional investment of US $21 billion and generate employment for many people in the sector.

The industry looks forward to working with the government to make India a manufacturing hub that can strengthen domestic manufacturing as well as support the country’s export sector to create much-needed jobs for Indians, he said.

The report noted that while electronics, aerospace, and medical devices have witnessed the entry of various global multinational companies in India for manufacturing, the country’s share in global production within these sectors is less than 3%.

The report is a result of USISPF’s initiative comprising of senior global executives from different industries to develop a set of recommendations as India advances a hi-tech manufacturing ecosystem in the country.

The study explores the factors that are impacting India’s competitiveness for companies planning to set up manufacturing operations in the country, and how these challenges can be addressed to make the country a dynamic player in the global value chain.

The USISPF president noted that some of the major challenges identified include the need for a strong supplier ecosystem, reduction in logistics cost, enhancing the skilled workforce, and enabling regulatory policies.

The report also seeks to widen the Goods and Services Tax (GST) coverage by bringing in products/sectors presently excluded from it to help reduce the impact of taxes and manufacturing costs.

In the interim refund of indirect tax on above items and GST on supplies ineligible for credit to be provided for improving cost competitiveness, the report recommended as it also sought higher tax benefits for research and development in these sectors.

The report suggests competitive bidding for government procurement, and enforcement mechanism to ensure central and state governments are aligned.

For the electronics sector, it recommends uniform duty structure across commodities by eliminating anomalies in HSN; appropriate classification of products to mitigate the risk of classification disputes and continued exemption in the form of zero duty for routers and other products as indicated in the Information Technology Agreement.

The report recommended linking preferential market access (PMA) to exports and rationalise local value-addition norms to achievable targets.

It seeks revisions to PMA policy by incorporating the ”Substantial Transformation” rules for value-addition as per global norms which adds another option of measuring local value add rather than only based on Bill-of-Material (BOM) and providing deemed domestic manufacturing credits to OEMs for 100% of their manufacturing volume – independent of product, export domestic consumption.

The USISPF website says that it is committed to creating the most powerful strategic partnership between India and the United States. It is entering a new era based on a strategic partnership between the two sides – one where they will work closely together with business and government leaders to achieve their goals of driving economic growth, job creation, innovation, inclusion, and entrepreneurship.

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