PLI
SCHEME - ECONOMY
News:
It’s time to reassess the
efficacy of the PLI scheme
What's
in the news?
● The
flagship Production Linked Incentive (PLI) scheme was introduced on March 21,
2020, to boost production, increase exports and curb imports.
● An
outlay of ₹1.97-lakh crore for 14
sectors, including automobile, telecom and textile, was sanctioned for
release over an extended period.
● More
than half of the scheme’s five-year period is over. It is time, therefore, to
look at the effectiveness of the scheme.
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.
Achievements
of PLI:
1.
Increase in Exports:
● Under
the PLI scheme, sectors such as electronics, automobiles, pharmaceuticals,
white goods, and textiles have witnessed significant growth in exports.
● PLI
Schemes have transformed India’s export basket from traditional commodities to
high-value added products.
2.
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%).
3.
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.
4.
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.
5.
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).
6.
Drones:
● Drones
sector has seen a 7times jump in turnover due to the PLI Scheme which consists
of all MSME Startups.
7.
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.
Concerns
about the PLI scheme:
● Distortion in allocation of resources
due to focus on selected sectors. Some sectors would get preference over
others.
● PLI
schemes 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. 2,874crore to beneficiaries against a claim of
Rs. 3,420crore 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.
WAY
FORWARD:
● Invest
more in efficient logistics and
infrastructure that will boost the manufacturing sector prospective.
● Improve ease of doing business
at the ground level as much as it is 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.