Decline in FDI temporary, India’s long term growth story strong: DPIIT Secretary

“The combination of strong growth, improving infrastructure will certainly ensure that long term investment flows into India will not get affected by these blips that may happen in a particular year due to a combination of geopolitical issues and economic setbacks in some of the developed countries. Those factors may lead to a dip, but we don’t see this as a long term challenge at all. India remains one of the world’s most preferred investment destinations,” Singh said during the interview at the sidelines of WAIPA World Investment Conference (WIC).

On India’s ability to attract investments amid global companies looking at an alternate destination for China, Singh said that India’s inflows are not down as much as China’s and that the outflows from China are much higher than the outflows from India.

“China has built up significant manufacturing capacities. Significant portion of the global supply chain, as much as 30%, are concentrated there. This happened over decades, from the 1990s onwards. It is not something that is going to disappear overnight, or shift overnight to India. But, you can set the ball rolling. We can see changes in certain sectors, mobile is one particular example,” Singh said.

The secretary said that there is not going to be full replacement but going forward vendors of large American and European companies will shift to India, not only in the mobile phone sector but other sectors such as shoes.

“We are combining PLI schemes to incentivise manufacturing capacities locally, including for manufacturing, ensuring some of the component manufacturing under PLI schemes are being supported. And combined with more aggressive approaches of tying up new FTAs we will certainly get significant traction,” he said.

Responding to former RBI governor Raghuram Rajan’s comments on the low value addition under production linked incentive scheme, the secretary said that value addition in several sectors under the PLI scheme has crossed the 50% threshold.

“Rajan was specifically talking about mobile manufacturing. In other areas, automobiles for example, the PLI already has a 50% value addition threshold already. So you don’t get any incentive till you reach 50% domestic value addition. In mobiles, this is slightly different, the threshold was related to incremental sales. But, even their domestic value addition has already touched nearly 20%, in three years. China has been about 38% in 20 odd years. So it’s fairly good progress. In the next two-three years it will go up further. Some PLI schemes already have stringent domestic value addition clauses,” the secretary said.

Singh said that the government is not considering any new PLI schemes. and is trying to ensure that the existing PLIs are fully subscribed and that many of them are still in gestation period.

“We want to see them up and running. We want to see the results. As of now there are no new PLI schemes under consideration.Some tweaking of those schemes to increase subscriptions is always possible. And this is an ongoing process,” he said.

Singh said that investment in white goods is coming in and that the incentives will start flowing from the last quarter of this financial year. This comes after the union government in October tweaked the PLI for white goods, specifically air conditioners and light-emitting diode lights, with the goal of ‘simplifying the scheme’s operations’ and promoting the ease of doing business.