March 1, 2024

Lukmaan IAS

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OVERVIEW OF PRODUCTION-LINKED INCENTIVE (PLI) SCHEMES

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TAG: GS 3: ECONOMY

THE CONTEXT: As per the Commerce and Industry Ministry’s report, the PLI schemes garnered an impressive investment exceeding Rs 95,000 crore by September 2023.

EXPLANATION:

  • This substantial investment led to the approval of 746 applications by November 2023, signifying a considerable interest from businesses in these schemes.
  • The Production-Linked Incentive (PLI) schemes introduced by the Indian government encompass 14 sectors aimed at bolstering manufacturing capabilities, augmenting exports, and enhancing employment opportunities.
  • These schemes have successfully enticed substantial investments, resulting in tangible growth across various industries.

Sectoral Distribution and Objectives

  • The 14 sectors covered by these schemes span across electronics, telecommunications, pharmaceuticals, white goods (including components for air conditioners and LED lights), and textiles.
  • The primary objectives of these initiatives are to fortify India’s manufacturing prowess, encourage export growth, and stimulate economic development.

Impact on Manufacturing and Employment

  • The implementation of PLI schemes has had a profound impact on various sectors.
  • The investments facilitated production and sales valuing Rs 7.80 trillion, resulting in the creation of over 6.4 lakh jobs, both directly and indirectly.
  • Additionally, the disbursement of incentives totalling around Rs 2,900 crore in the fiscal year 2022-23 highlights the government’s commitment to incentivizing growth.

Sector-specific Achievements

  • Electronics Sector:
    • Notably, within the electronics sector, there has been a 20% value addition in mobile manufacturing over three years.
    • This industry witnessed a significant boost, with smartphones contributing USD 44 billion to the total electronics production, including USD 11.1 billion from exports.
  • Telecommunications Sector:
    • Import substitution in the telecom sector reached an impressive 60%, demonstrating India’s progress towards self-reliance, particularly in Antennae, GPON, and CPE manufacturing.
  • Pharmaceutical Sector:
    • The pharmaceutical industry experienced a substantial reduction in raw material imports.
    • India’s strides include the domestic production of unique intermediate materials and bulk drugs, including critical products like Penicillin-G.
    • Moreover, technology transfer facilitated the manufacturing of medical devices such as CT scan machines.
  • White Goods Sector:
    • In the white goods segment, 64 companies have been selected under the PLI scheme.
    • These companies are poised to invest significantly in air conditioner and LED component manufacturing, with future investments projected to create additional employment for approximately 48,000 individuals.
    • Notably, 13 foreign companies are partaking in this initiative, investing Rs 2,090 crore, indicating global interest in India’s manufacturing ecosystem.

Production-Linked Incentive (PLI) schemes

  • Production-Linked Incentive (PLI) schemes are a type of industrial policy tool used by governments to encourage domestic manufacturing in specific sectors.
  • Under these schemes, manufacturers are offered financial incentives based on their production and sales.
  • These incentives can take various forms, such as cash grants, tax breaks, or duty-free imports.

Here are some key features of PLI schemes:

  • Production-linked: The incentives are directly linked to the quantity or value of goods produced. This helps to ensure that the scheme leads to actual increases in production, rather than just encouraging companies to game the system.
  • Focus on targeted sectors: PLI schemes are typically targeted at specific sectors that are considered to be strategically important for the country’s economic development. This could include sectors such as electronics, automobiles, pharmaceuticals, or renewable energy.

Potential benefits of PLI schemes:

  • Increased domestic production: PLI schemes can help to boost domestic production in targeted sectors, which can lead to economic growth, job creation, and import substitution.
  • Enhanced global competitiveness: By improving the efficiency and competitiveness of domestic industries, PLI schemes can help Indian companies to compete in the global market.
  • Technological innovation: PLI schemes can encourage companies to invest in research and development, which can lead to technological innovation.
  • Attraction of foreign investments: PLI schemes can make India a more attractive destination for foreign direct investment (FDI).

Conclusion

  • The robust response to the PLI schemes across diverse sectors underscores their efficacy in attracting investments, fostering production, creating employment opportunities, and reducing import dependency.
  • The significant achievements in value addition, export promotion, and technological advancements reaffirm India’s commitment to bolstering its manufacturing capabilities and becoming a global manufacturing hub.

SOURCE: https://www.business-standard.com/industry/news/pli-schemes-attracts-over-rs-95-000-cr-investment-till-sep-centre-123122600771_1.html

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