Flex plans to expand India manufacturing operations

US electronic component manufacturer Flex is considering ramping up investments in India to expand its manufacturing capabilities and increase its exports from the South Asian nation to around $12 billion, people familiar with the matter said.

“The president of the company, Richard Hopkins, met with a string of Indian ministers including communications and IT minister Ravi Shankar Prasad on Thursday and discussed how the company was exploring various geographies to increase production in India,” one person told ET.

Hopkins is said to have told Prasad that the $26 billion company was considering India as one of the top geographies to increase its investments and discussed a significant export roadmap of electronic components from the country for which it would need “specific support” from New Delhi, the person said.

The proposed investment by Flex, one of the world’s largest exporter of electronics goods, coincides with India’s efforts to attract global manufacturers. But experts said India needs to move quickly on policy steps to compete with Vietnam and Malaysia in a bid to position itself as a global manufacturing hub.

Flex, which entered India in 2001, export electronics worth about $600 million from its 11 facilities across Chennai, Pune, Hyderabad, Bengaluru, Gurgaon and Vishakhapatnam. It employs some 25,000 people. A mail sent to Flex remained unanswered.

In its meetings with Indian authorities, Flex said the recent corporate rate tax cut was a step in the right direction but the government needs to come out with incentives to attract electronic component manufacturers in place of the Merchandise Exports from India Scheme (MEIS), another person said.

Last month, the World Trade Organization found India’s export incentive schemes including MEIS were inconsistent with provisions of the trade body’s Agreement on Subsidies and Countervailing Measures. India was given 90 to 180 days to withdraw these schemes.

“We recently lost a case at the WTO and are phasing out the MEIS scheme. The challenge is in finding a scheme that cannot specifically be for exports but does encourage exports out of India and offsets the disabilities vis-a-vis China and Vietnam,” a senior government official said.

The official added the government realizes that it needs to put schemes to attract investments that may otherwise flow to destinations such as Malaysia and Vietnam.

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