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Indian DEITY hands down new manufacturing subsidy plan

With anti-China riots in Vietnam, the timing is good

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India's Department of Electronics and Information Technology – which cheerfully uses the domain name deity.gov.in – is making a play to bring more electronics manufacturing work to the sub-continent.

India and the Department established a Modified Special Incentive Package Scheme (MSIPS) in 2012, offering to rebate up to 25 per cent of capital expenditure for certain types of electronics manufacturing projects. Extensive tax holidays are on offer for firms that set up semiconductor or LCD display fabrication facilities.

The scheme has worked quite well: IBM and STMicro have already indicated intentions to build chip fabs in India.

The government has now designated eight new cities as suitable for a pool of $US1.65bn MSIPS subsidies. In widely-reported remarks, Communications and Information Technology Minister Ravi Shankar Prasad named Ghaziabad, Vadodara, Ahmedabad, Gandhinagar, Nagpur, Nasik, Aurangabad and Thane as cities where subsidies will now be offered to those who create electronics-manufacturing plants.

Indian IT folk The Reg spoke to at Computex bemoaned the state of the nation's infrastructure, arguing it holds the country back and is a disincentive to foreign investment. That won't be a massive problem for the chosen cities: Vadodara and Ahmedabad are very close together and helpfully close to ports. Nasik and Thane are close to Mumbai.

The announcement is also significant in its timing, as May 2014 saw anti-Chinese riots in parts of Vietnam over the issue of a Chinese oil platform plonked down in Vietnamese waters without so much as a by your leave.

Vietnam has ambitions to lure manufacturing work away from The Middle Kingdom and China doesn't mind, partly because Vietnam currently offers lower wages and partly because it knows that manufacturing isn't a long-term proposition once its population becomes better-educated. Vietnam is more or less where China was 20 years ago: its Communist rulers have sniffed the wind and figured out that they need to bring decent jobs to its populace before they agitate for different forms of government. The Party also knows that not everyone can get a job in an Intel fab, so is quite keen on lesser forms of manufacturing.

So is India, which sees manufacturing jobs as a way to modernise its cities and spread the benefits of its technology boom beyond the educated folks who've done well in IT services or business process outsourcing.

Throwing some extra Rupees at vendors won't retard India's development, but also probably won't represent a tipping point.

Yet The Reg's Asia-Pacific desk is aware that one technology conference this month decided Vietnam is not a place it thinks delegates will be comfortable to visit. With Thailand's recent military coup not the kind of thing foreign investors enjoy when compiling risk reports, the timing of India's expanded subsidies program is exquisite. ®

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