The government has notified the production-linked incentive (PLI) scheme 2.0 for IT hardware for enhancing India's manufacturing capabilities and enhancing exports. Prime Minister Narendra Modi-led Cabinet on May 29 gave its nod to introduce the PLI Scheme 2.0 for IT hardware.

The Ministry of Electronics and Information Technology (MeitY) has now invited applications for incentives and the approved applicants will also be allowed to apply under PLI 2.0. The window of applications under PLI Scheme 2.0 for IT hardware will open from June 01, 2023.

"The PLI Scheme 2.0 for IT hardware is expected to result in broadening and deepening of the manufacturing ecosystem by encouraging the localisation of components and sub-assemblies and allowing for a longer duration to develop the supply chain within the country," said the ministry.

Additionally, the scheme provides increased flexibility and options for applicants and is tied to incremental sales and investment thresholds to further incentivise growth. "Semiconductor design, IC manufacturing, and packaging are also included as incentivised components of the PLI Scheme 2.0 for IT hardware," says the scheme.

The PLI scheme 2.0 for IT hardware has been approved with a budgetary outlay of ₹ 17,000 crore. The scheme is expected to lead to total production of about ₹3.35 lakh crore, bring an additional investment of ₹2,430 crore in electronics manufacturing, and will lead to the generation of 75,000 additional direct jobs.

The scheme will promote large-scale manufacturing in laptops, tablets, all-in-one PCs, servers, and ultra-small form factor devices, and contribute significantly to achieving electronics manufacturing turnover of approximately $300 billion by 2025-26.

The scheme has three categories of applicants, namely global companies, hybrid (global/domestic) companies, and domestic companies.

The domestic production of electronic goods has increased substantially from ₹3,17,331 crore in 2016-17 to ₹6,40,810 crore in 2021-22, growing at a compound annual growth rate (CAGR) of 15%.

India’s share in global electronics manufacturing has grown from 1.2% in 2014 to 3.75% in FY 2021-22, as per industry estimates. With the domestic demand for electronics hardware expected to rise rapidly to around $300 billion by FY 2026, India can't afford to bear the rapidly increasing foreign exchange outgo on account of the import of electronics.

The incentive per company will be applicable on net incremental sales of manufactured goods (covered under the target segment) over the base year, subject to a ceiling of ₹4,500 crore for global companies, ₹2,250 crore for hybrid (global/domestic) companies and ₹500 crore for domestic companies.

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