Production Linked Incentive Scheme

Production Linked Incentive Scheme

News: The PLI Schemes have led to a significant increase in production, employment generation, economic growth and exports in the country.

What is PLI Scheme?
 The PLI scheme gives financial incentives/rewards based on their production and sales. Its main objective is to scale up domestic manufacturing capability, make our goods competitive globally and create more jobs.
 The incentives are calculated based on incremental sales. They range from 1% to 20% depending on the industry.

Which sectors encompass the PLI scheme?

What are the achievements of the PLI Scheme?

Increase in Exports
 Under the PLI scheme, sectors such as electronics, automobiles, pharmaceuticals, white goods, and textiles have witnessed significant growth in exports.
 Also, PLI Schemes have transformed India’s export basket from traditional commodities to high-valueadded products.

Higher FDI
 76% increase in FDI in the Manufacturing sector in FY 2021-22 compared to the previous year; Drugs and Pharmaceuticals (+46%), Food Processing Industries (+26%) and Medical Appliances (+91%).

Value Addition
 It was noted that 20% value addition was achieved in mobile manufacturing within a period of 3 years. Whereas countries like Vietnam achieved 18% value addition over 15 years and China achieved 49% value addition in over 25 years.

Job Creation
 The drone manufacturing sector alone is expected to create more than 10,000 direct jobs, while the textile sector is estimated to create over 7.5 lakh additional jobs.

Import Substitution
 Import substitution of 60% has been achieved in the Telecom sector and India has become almost self– reliant in Antennae, GPON (Gigabit Passive Optical Network) & CPE (Customer Premises Equipment).

Drones
 Drones sector has seen a 7 times jump in turnover due to the PLI Scheme which consists of all MSME Startups.

Food Processing
 Under the PLI Scheme for Food Processing, sourcing of raw materials from India has seen significant increase which has positively impacted income of Indian farmers and MSMEs.

What are the concerns about PLI scheme?
 Distortion in allocation of resources due to focus on selected sectors. Some sectors would get preference over others.
 PLI scheme may create industries that are dependent on government subsidies for their survival. These industries may not be competitive without ongoing government support.
 Fiscal responsibility and burden on the government.
 Concerns over whether it will attract high-quality investments that can lead to technology transfers and improvements in productivity.
 In 2022-23, the government paid Rs. 2,874 crore to beneficiaries against a claim of Rs. 3,420 crore in various sectors.
 In the electric auto industry, firms are looking for clarity on the incentives they are supposed to receive. In 2022-23, incentives could not be disbursed because no auto company presented the required documents.

What should be the way forward?
 Invest more in efficient logistics and infrastructure that will boost manufacturing sector prospective.
 Improve ease of doing business at the ground level as much as it seen in various rankings.
 Access to affordable capital and financing for manufacturers.
 Evaluate existing free trade agreements (FTAs) to ensure they benefit the domestic manufacturing sector. Also, consider engaging in FTAs that provide Indian manufacturers with access to global markets.

Note - To know more about PLI scheme we recommend you to check the following link
https://www.investindia.gov.in/production-linked-incentives-schemes-india