Tamil Nadu to diversify manufacturing from consumer electronics and textile to EV

Mr. Sarian Krishnan; Source: Guidance Tamil Nadu

A delegation from India’s Tamil Nadu state government visited Taiwan in late October, following the lifting of quarantine requirements for travelers to Taiwan. During the visit to Taiwan, the delegation met with electronics manufacturers Foxconn, Pegatron, Taiwan Electrical and Electronic Manufacturers Association (TEEMA), and Taiwan Footwear Manufacturers Association (TFMA), among others.

The Tamil Nadu delegation included Mr. Sarayan Krishnan, Additional Chief Secretary, Department of Industries, Investment Promotion and Commerce, Government of Tamil Nadu and Ms. Pooja Kulkarni, CEO and MD, Guidance Tamil Nadu, the nodal investment promotion agency of the Government of Tamil Nadu. . .

Tamil Nadu accounted for 9% of India’s national GDP in 2021, or about US$300 billion. The southern state plays an important role in India’s manufacturing sector with industries flourishing around the state capital Chennai and other industrial centers of the state. .

Foxconn’s iPhone production is primarily based on the outskirts of Chennai; The Hyundai Motor Company also built its own facilities near the capital. Pegatron, Delta Electronics, Dell, Flex, Daimler, Yamaha, Salcomp, Tata Electronics, Ola Electric, and Taiwan’s largest shoe manufacturer Feng Tay Enterprise are also manufacturing in Tamil Nadu.

The delegation visited Taiwan with a mission to attract more investment from electronics manufacturing, technical textiles and footwear, and electric vehicle (EV) manufacturing to help the state achieve industrial diversification and grow into a US$1 trillion economy by 2030. Help to do.

Apart from Taiwan, countries like Japan, South Korea, Singapore, Germany, France and USA are the focus countries for Tamil Nadu. The delegation’s objectives include accelerating the state’s industrial growth and navigating a post-pandemic “China plus one plus one” strategy.

Like many other countries in the world, the ongoing conflict between the US and China has led to large amounts of foreign investment in India, especially in the state of Tamil Nadu. India has also imposed strict restrictions on Chinese investment since the Pulwama attack. 2019, resulting in a decline in relations between India and China.

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Krishnan said the state government offers flexible incentives and takes prompt steps to remove hurdles for foreign investors. He said, “Tamil Nadu offers a flexible and customized incentive structure to meet various industrial needs”.

Since 1992, the state government and investment promotion agency Guidance have been formulating policies specific to the Tamil Nadu sector and making changes and adjustments for foreign industrialists. Policy flexibility and political stability have allowed the state government to maintain active communication with companies and help industrialists resolve issues.

Krishnan added that political parties in the state share a common goal – to commit to bringing in more investment to drive economic growth, so whichever party comes to power, there is stability in policy and There is continuity.

Industrial diversification from electronics, textiles, footwear to EVs

The global pandemic was a hard-learned lesson for supply chains. In post-pandemic times, Tamil Nadu is trying to increase diversification in terms of economic growth and industrialization, realizing that the economy cannot depend on just a few sectors. This was evident during the first wave of the pandemic where Tamil Nadu was among the few states in India that recorded a positive increase.

According to Krishnan, one way to diversify the economy is to strengthen the electronics value chain by manufacturing a wide range of products – chips, components, cameras, and end devices, from car electronics to EV batteries, non-leather. Shoes etc. Other ways to achieve industrial diversification include the development of EV manufacturing ecosystems. Tamil Nadu seeks to diversify geographically by creating more industrial clusters across the state and spreading manufacturing activities evenly.

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Electronics assembly usually requires line workers to live in hostels and work around the clock. In contrast, textile factories are mostly set up in rural areas and workers may work regular 9-5 shifts. Workers in textile and footwear companies have generally seen an improvement in their standard of living, Krishnan said. The Tamil Nadu government, therefore, wants to bring more textile and footwear manufacturers to India.

Feng Tay set up its first facility in Tamil Nadu in 2006 and is already building a third factory. The shoe maker has created around 40,000 jobs so the state government is eager to replicate this business model. Krishnan said the government plans to set up around 30 such large factories across the state with at least one in each district.

During a visit to TFMA in Taichung, Kulkarni noted that 50% of India’s footwear exports are made to Tamil Nadu and that the state is investing in new investments by providing varying amounts of subsidies on land acquisition, IP protection, environmental infrastructure, and more. Intends to encourage. Based on the scale of investment, location, and number of employment opportunities.

Tim Pao, PwC Taiwan partner for international tax services, added that India is not exempt from corporate income tax, but manufacturers entering production in India by March 2024 can opt for a 15% subsidy on income tax. However, compared to rewards for large manufacturers, subsidies for small and medium-sized manufacturers seem less attractive.

Pao said that for the formation of a new industrial cluster and a strong supply chain, the Indian government needs to increase subsidies for SMEs.

Aiming for a ‘Trillion Dollar Economy’

Being India’s second largest GDP contributor, Tamil Nadu is striving to develop a complete ecosystem of EV manufacturing from two-wheelers, cars, car electronics to EV batteries. Krishnan said Tamil Nadu already has a strong EV manufacturing base, and currently, one-third of the EVs produced in India are made in Tamil Nadu.

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“Tamil Nadu has a large share of two-wheeler and three-wheeler production and is booming in car manufacturing. For example, Hyundai has its largest factory outside South Korea in Tamil Nadu,” Krishnan said. Krishnan said.

Over the past three years, the state has seen investment proposals of nearly US$50 billion, combining domestic and foreign investment. Even during the COVID years, Tamil Nadu received the highest investment proposals among all states – around US$ 10-15 billion annually.

Tamil Nadu has a college graduate ratio of over 50% among the population aged 17 to 23, almost twice the national average of 27%.

Tamil Nadu is expected to become a trillion dollar economy by 2030. Its economic size is now about 300 billion US dollars.

According to PwC’s Pao, India’s Special Economic Zone (SEZ) was primarily export-oriented but restrictions on domestic sales have been relaxed.

Manufacturers in SEZs are now able to find ways to access India’s domestic consumer market. Moreover, India’s new bill, “DESH” (Development of Enterprise and Service Hubs Bill) aims to upgrade SEZs and open them up to the service sector, Pao said.

DESH is expected to come through parliamentary debate in the first quarter of 2023.

Krishnan concluded the interview by stating that Tamil Nadu offers a diverse, profitable place to do business and a large customer base. As India’s income levels rise, consumer electronics and footwear are two items that India wants to produce at a price that is affordable for Indians.


Tamil Nadu delegation meets Tema; Source: ITA


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