The Production Linked Incentive (PLI) schemes are a key initiative of the Indian government to boost domestic manufacturing and exports in various sectors. The schemes aim to create national manufacturing champions, generate employment, enhance innovation and reduce import dependence. Here are some of the highlights of the PLI schemes and their impact on the economy.
What are the PLI schemes?
The PLI schemes are a form of performance-linked incentive that offer financial incentives to companies on incremental sales from products manufactured in domestic units. The schemes cover 14 sectors, including electronics, pharmaceuticals, telecom, food processing, automobiles, solar modules, textiles and specialty steel. The total outlay for the schemes is INR 1.97 lakh crore (about $27 billion) for a period of five years.
How do the PLI schemes work?
The PLI schemes are based on certain eligibility criteria, such as minimum investment, incremental sales, value addition and export orientation. The eligible companies have to apply for the schemes and get approved by the respective nodal ministries or departments. The approved companies have to meet the annual targets to avail the incentives, which range from 4% to 12% of incremental sales.
What are the benefits of the PLI schemes?
The PLI schemes are expected to have multiple benefits for the economy, such as:
- Attracting large-scale investments in manufacturing and creating a conducive ecosystem for domestic and global players.
- Enhancing the competitiveness of Indian products in domestic and international markets and increasing India’s share in global value chains.
- Promoting innovation and R&D in cutting-edge technologies and creating a pool of skilled workforce.
- Creating employment opportunities for millions of people and boosting income levels.
- Reducing import dependence and improving trade balance and foreign exchange reserves.
- Contributing to India’s vision of becoming a $5 trillion economy by 2025.
What is the progress of the PLI schemes?
The PLI schemes have received an overwhelming response from the industry, with more than 1,000 applications received across various sectors. As of June 2023, 733 applications have been approved with an expected investment of INR 3.65 lakh crore (about $50 billion). Out of these, 176 are from micro, small and medium enterprises (MSMEs), which are expected to benefit from the schemes. Some of the major companies that have been approved under the PLI schemes include Samsung, Foxconn, Wistron, Dell, HP, Lava, Micromax, Dr Reddy’s, Sun Pharma, Airtel, Jio, Tata Motors, Mahindra & Mahindra, Adani Green Energy and JSW Steel.
What are the challenges and opportunities for the PLI schemes?
The PLI schemes face some challenges in terms of implementation and monitoring, such as ensuring timely disbursement of incentives, resolving grievances of applicants, ensuring compliance with environmental and social norms, coordinating with state governments and other stakeholders, and evaluating the impact of the schemes. However, these challenges can be overcome with effective governance mechanisms and regular review and feedback.
The PLI schemes also offer immense opportunities for enhancing India’s manufacturing capabilities and exports in strategic sectors. The schemes can help India leverage its demographic dividend, large domestic market, low-cost labour force, abundant natural resources and favourable policy environment to become a global manufacturing hub. The schemes can also help India diversify its export basket and tap into new markets and regions. The schemes can also foster a culture of innovation and quality among Indian manufacturers and enable them to compete with global leaders.