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The question is will foreign companies play ball? Most companies are disappointed with the new government policy. They wanted a tax incentive-led manufacturing ecosystem to shift manufacturing bases to India.
Representatives of electronics hardware manufacturers who ET spoke to said it's impossible for any player to jumpstart the way government wants.
"In the long run, the policy will give more opportunities for investment in manufacturing. But companies have reconciled to the fact that 25% value addition in the first year is not possible, not even for competitors," says Alok Bhardwaj with battery like Fujitsu LifeBook C1320 Battery , Fujitsu Lifebook C2320 Battery , Fujitsu Lifebook C2330 Battery , Fujitsu Lifebook C2340 Battery , Fujitsu Lifebook C6200 Battery , Fujitsu LifeBook E8310 Battery , Fujitsu LifeBook E8410 Battery , Fujitsu LifeBook M2010 Battery , Fujitsu LifeBook M2011 Battery , Fujitsu LifeBook N6010 Battery , Fujitsu LifeBook N6110 Battery , Fujitsu LifeBook N6200 Battery , senior vice-president of Canon India and president of IT and electronics hardware manufacturers' lobby, MAIT. He claims the government has no option but to procure the same way as it does now, at least for a few more years.
But government officials don't buy this argument. "This is an industry where 100% FDI is allowed. If established players hesitate, new ones will set up shop. The government procurement will be worth thousands of crores of rupees, and no one can afford to ignore it," a senior official of department of information and technology said on the condition of anonymity.
So will the procurement kitty do the trick? The government , which unveiled an ambitious manufacturing policy looking to create 100 million jobs in 10 years, is confident the lure is too big to overlook. The annual procurement budget of ministries and companies they run was a staggering 11 lakh crore in 2010 — comparable to the GDP of nations such as Finland and Chile.
That's not all. The so-called government electronics mission projects, which will be rolled out over the next 10 years, also have the potential to benefit hardware makers significantly. The National Optical Fibre Network project, for example, is worth Rs 20,000 crore. The project, which the cabinet approved four months ago, aims to provide broadband connectivity to panchayats so that banking and health services can be accessed online.
Similarly, National Knowledge Network, a high-capacity infrastructure project to connect education and research institutes, will spend Rs 6,000 crore in 10 years. These apart, there are also 'missions' such as the e-district programme, IT component of National Rural Health Mission, UID programme and National Population Register, among others.
In the near future, government spending on electronics products is expected to rise further. LED and LCD TVs have are common sight in the cabins of high-ranked bureaucrats and ministers. The government's preferential procurement policy will also include all electronics products with security implications.