India launches global subsidy battle to attract overseas manufacturers

Rajesh Kumar Singh, Secretary in the DPIIT [Courtesy of the Ministry of Trade, Industry and Energy]

India has entered a global subsidy race to attract top manufacturing companies from around the world, with the Indian government unveiling extensive support measures aimed at luring companies in advanced industries that promise to reimburse 40 percent of the construction costs for battery and semiconductor factories.

During an exclusive interview with Maeil Business Newspaper on Monday, Rajesh Kumar Singh, Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT), said during his visit to South Korea that the Indian government’s goal is to attract large-scale battery factories with an annual production capacity exceeding 20GWh. To achieve this, “the Indian government plans to support 40 percent of the battery construction costs and provide a subsidy of $3 billion for battery production,” he said. His statement is the first time the Indian government has provided concrete incentives to attract the battery industry.

Singh emphasized the potential for cooperation between Korea and India in various sectors, including automobiles, batteries, chemicals, and heavy industries. He noted that over 600 Korean companies already have a presence in India, including industry leaders such as Samsung Electronics, LG Electronics, Hyundai Motor, and Kia.

“India’s economy is growing very rapidly, and we expect that many products manufactured in India will be exported in the next ten years,” he said. In 2022, India’s gross domestic product (GDP) was $3.46 trillion, making it the fifth-largest economy globally with a population of 1.37 billion, second only to China.

Battery and electric vehicles stand out as key areas for future collaboration between Korea and India. Singh said, “India’s electric vehicle market is growing at a rate of 40 percent annually, and we are preparing policy support,” adding the government plans to announce a production-linked incentive (PLI) policy for manufacturing within the next two weeks.

While the central government has already committed to supporting 40 percent of the battery factory construction costs, local governments are also considering additional support measures. Korean automakers Hyundai Motor and Kia already operate factories in Chennai and Anantapur, and in August, Kia acquired General Motors’ Talegaon plant in India to strengthen its EV production capacity.

Regarding the semiconductor industry, Singh said, “If companies form partnership with their Indian partners to build factories, we plan to provide up to $10 billion in support, with 50 percent of the required funds provided as subsidies.” India has been actively implementing significant support measures to attract semiconductor manufacturing bases, with local governments offering 20 percent of construction costs in addition to central government incentives. A notable example is Micron, a U.S. memory chip company that invested $2.75 billion to build a semiconductor back-end facility in Gujarat, India, in June.

Singh also highlighted Korea’s strong competitiveness in the oil and petrochemical sectors, saying, “Korea has a strong presence in the oil and petrochemical industries. India depends on imports for 80 percent of its petroleum usage, making it essential to establish local factories.” He also stated India’s goal to attract factories as the economy grows, leading to increased plastic usage in the petrochemical industry.

But Korean companies have expressed concerns about India’s lack of established industrial infrastructure and high tariff barriers, which could limit trade activity.

In response to these concerns, Singh responded, “India is investing $1 trillion in infrastructure, including roads, ports, and airports, by 2030. As a result, more than 30 kilometers of roads are being constructed daily, and 72 new airports are in the pipeline.”