‘Faster approval for FDI from China can be considered if it boosts manufacturing’: DPIIT Secretary

Singh also said that tweaks in some sectoral production-linked incentive (PLI) schemes are being considered. Edited Excerpts:

The Economic Survey suggests that India should attract FDI from China and it is time to change our approach. Your thoughts?

Given the issues with China, we are not going to be able to do a full-scale opening up, but where the proposals are going to add value to our manufacturing ecosystem, it can be considered even under the present regime, which is basically just a government route. It is not automatic. It just goes through the government. So there’s nothing which prevents us from, for example, getting an Apple vendor or sub-vendor to come to India if we feel that it is going to help improve our localization ability in that particular area. There’s no blanket ban even today.

So does this mean that there will be a relook at PN3?

PN3 as such is not being re-evaluated right now. But within the PN3 provisions, whether that process of approval through the government scrutiny route, if that can be speeded up, can always be seen.

What would be the way forward on the requirement of Chinese technicians?

For the PLI sectors, that has been sorted out, both for beneficiaries as well as for non-beneficiaries. In those sectors, there is now a system where we will provide faster processing for genuine technicians who are required to set up machinery, install and do test runs.

Job creation in high-tech sectors like mobile phone manufacturing is lower than various others. How can PLI schemes for labour-intensive sectors be optimised for job creation?

There is a lot of labour involvement in mobile assembly, particularly female labour. So that’s not exactly true, but yes, in general, the labour intensity in mobile phones will probably not be as high as in traditional industries like leather, toys, textiles, etc.

The traditional sectors will have to grow based on India’s traditional strengths in those areas. We have reasonably cost-effective labour and we have to combine that with improving their productivity through skilling and upskilling and give them any tariff and non-tariff support that they require to improve their strength.

PLI is not the only way to support your industry. There are other mechanisms such as rationalisation of duties, upskilling, and even the employment-linked incentive scheme, the credit guarantee scheme, general ease of doing business issues and logistics improvement. All of those can also improve your traditional sector.

So PLI per se might not need a tweak?

Tweaks in some sectors are being considered but it is a matter for the cabinet. I can’t discuss it.
DPIIT had sought a third-party assessment of various PLIs, including white goods, by the Arun Jaitley National Institute of Financial Management..

That order has already been given to them, but it’s a little early to do it. It is more about confirming from the beneficiary that things are on track.

PLI disbursements in FY24 were not as per the expectations. Is that a concern?

A lot of projects are in the gestation period, particularly in steel and even automobiles. The allocations [of funds] are also very large. But per se, I’m not too concerned, because the design of the scheme is such that people have to perform first and then they will get the incentives.

So in that sense, investment, sales, exports and employment are relatively on track. The intention is not to burn cash. It is to get investments and get things going, and if they meet their criteria, then we provide them with the incentive.

In certain PLIs, the industry believes that eligibility conditions are difficult…

Since they are tendered out based on contract conditions, it is difficult to keep changing that (criteria for investments). But where it is causing hardship or where the project management agencies (PMAs) are creating some purely technical or interpretational issues, those have been resolved to a great extent.

PMAs have been advised to facilitate the disbursements and things will improve. And of course, in some sectors, like mobiles, electronics and even in food processing, pharma, etc, disbursements are picking up. Once companies meet the 50 per cent Domestic Value Addition (DVA), as many companies have, they are very confident that they will be able to utilise their entire incentive allocation, which is almost Rs 25,000 crore.

Once the investments have come in, and sales have started in the majority of the sectors, there is confidence that incentives will also get largely dispersed. And even if it doesn’t get dispersed, it is a secondary issue. The real issue is whether the employment, the investment, the exports, the sales are happening because sales in particular, also give you back revenue. So in that sense, the design of the scheme is such that it is also self-sustaining.