India unveils plans for manufacturing hub

Manufacturers' Association for IT signs an agreement to build a 100-acre electronics manufacturing cluster in Sri City, Chennai, as the government fast-tracks its ambition to become a production hub.

A 100-acre electronics manufacturing cluster (EMC) will be constructed in southern India to entice companies such as Microsoft, Hewlett-Packard, and Nokia to build their products in the country.

Manufacturers' Association for Information Technology (MAIT) this weekend announced an agreement to build the Sri City-MAIT EMC Park in Sri City, a commercial area located about 55 kilometres south of Chennai. Companies can acquire land for a quarter of the price of surrounding areas, according to Sri City's managing director Ravindra Sannareddy.

In a statement provided to ZDNet Asia, MAIT's executive director Anwar Shirpurwala, said EMC Park--to be made available to MAIT member companies--will have manufacturing units, component manufacturers of IT products, and a common facility testing center and facilities to train workers.

"[Sri City] has a ready mix of infrastructure, educational institutions, hospitals and logistics, which made it a natural choice for us to sign the agreement," said Shirpurwala.

Over the next year, at least 10 electronics manufacturing clusters will be fabricated in the country, according to a report last week in The Hindu which quoted Ajay Kumar, joint-secretary of the Department of Electronics and IT. Since the government approved the National Policy on Electronics last October, India had been on track to become a hub for global electronic system design and manufacturing, Kumar told the 9th Vision Summit of the India Electronics and Semiconductor Association (IESA) held recently in Bangalore.

This year, the government will ease tax burdens on companies that plan to invest Rs. 25,000 crore (US$4.6 billion) to manufacture up to 29 categories of electronics products listed in the Modified Special Incentive Package Scheme (M-SIPS).

To persuade companies to invest in the local industry, India has wielded both the carrot and the stick.

The proposed "Buy India" policy , for instance, will force companies to purchase a certain percentage of locally-manufactured technology products and components and is meant to help offset a technology trade surplus predicted to swell to US$300 billion by 2020. It also will require foreign companies to manufacture their products locally to continue trading in India.

However, critics have opposed forcing companies to buy local products from non-existent or unproven suppliers such as wireless technology and complex enterprise technology such as switches and routers, and even consumer goods such as tablets, laptops, and mobile handsets.

"You cannot force manufacturing to happen in India when there's no support system for manufacturing," Akshay Grover, an India telecom analyst at consulting firm Ernst & Young, said in a January report by the Wall Street Journal.

Ron Somers, president of the U.S.-India Business Council, a lobby group for U.S. firms in India, added in the report: "India is the largest free-market democracy in the world. To mandate local manufacturing is antithetical to the very concept of a free marketplace."

Indian officials, though, have held up Panasonic which trained staff to grow local production as an example of what is possible. A government committee, led by former HCL chairman Ajay Chowdhry, in May will report on how India should revive the local production of products such as set-top boxes, tablets, smartphones, and micro ATMs .