India’s cabinet has cleared U.S. chipmaker Micron Technology’s (MU.O) $2.7 billion plan for a new semiconductor testing and packaging unit ahead of Prime Minister Narendra Modi’s state visit to the United States this week, a senior government source said on Tuesday. The two sides agreed on production-linked incentives worth 110 billion rupees ($1.34 billion) for the plant, which is set to be built in Gujarat, Modi’s home state, the Indian official added. He declined to be identified before a public announcement during Modi’s U.S. trip this week.
The move is part of a broader effort to build stronger technology ties between the two countries and make India a key manufacturing hub for chips and a leading player in electronics and automobiles. The plant will likely boost jobs in Gujarat, the source added. Micron seeks to expand its presence in India after its ill-fated attempt to open a production plant in China last year, which Chinese regulators blocked.
While the Micron deal is a big win for India, it also highlights the challenges awaiting the country’s quest to become a global technology powerhouse. For one, it needs to be able to produce its chips. It must also ensure that its workers are skilled enough to compete with global competitors and streamline regulatory processes.
Another critical challenge is ensuring that India’s rapid economic growth does not displace its population or overwork the nation’s existing infrastructure. The world’s fifth-largest economy grows about 7 percent yearly and has a young, highly educated workforce. Its technology industry is thriving, and its consumer market is expanding. Its barely-scratched potential as a manufacturing hub is drawing interest from the world’s largest economies.
The highlight of Modi’s trip will be an address to Congress, a rare honor for a leader. He is expected to be feted by leaders of the world’s most powerful democracy, who will applaud him for his economic achievements and for bringing India into its own on the global stage. But some of the issues that will loom large over his visit are the democratic backsliding and attacks on minorities that have marred his populist, Hindu nationalist Bharatiya Janata Party since it came to power in 2014.
The visit is essential for the United States, which sees an India that can help it push back against China’s rise. But Washington is concerned about some of India’s policies, including its refusal to condemn Russia’s invasion of Ukraine. The optics of Modi being praised by the president will play well with Indian voters, who credit him for making their country a major global player and attracting the attention of influential Western leaders.
