The government is set to extend the production-linked incentive (PLI) scheme to eight additional sectors to stimulate domestic production. The PLI Scheme, fundamentally output- and outcome-oriented, will only pay incentives if goods are produced by manufacturers. The scheme plans to provide cash rewards for five to seven years, covering all nascent and essential sectors. The sectors likely to be incorporated may range from automobile and networking products to food processing, advanced chemistry, and solar PV manufacturing.
Understanding the Need for Extension
Sunrise sectors hold a great deal of promise, but often require support during their initial stages. With the implementation of the PLI scheme, such sectors could develop a sturdy export base. Given the rising global demand for diversification in supply chains, India has the potential to emerge as a significant player. The government initiated the PLI scheme for mobile phones (electronic manufacturing), intending to transform India into a manufacturing hub. Eventually, it extended the scheme to include pharmaceutical products and medical equipment sectors.
The PLI Scheme for Large Scale Electronics Manufacturing
The PLI scheme promotes domestic manufacturing by proposing a financial incentive to attract sizable investments in the electronics value chain. This includes electronic components and semiconductor packaging. Under the scheme’s framework, electronics manufacturing firms will receive an incentive ranging between 4% to 6% on incremental sales (over and above the base year) of goods manufactured within the country over the next five years.
This particular scheme will only be applicable to target segments, specifically mobile phones, and certain electronic components.
Anticipated Impact of the PLI Scheme
The government anticipates that the PLI scheme will catalyze a significant increase in domestic value addition for mobile phones. It projects a growth from the present rate of 20-25% to an impressive 35-40% by 2025. In addition to this, the scheme is expected to generate an extra 8 lakh jobs, encompassing both direct and indirect employment opportunities.
The efficacy of the PLI scheme can be gauged from the outstanding eight-fold increase in mobile phone production in the country over the last four years. The numbers escalated from around Rs. 18,900 crore in 2014-15 to a whopping Rs 1.7 lakh crore in 2018-19. This surge in numbers suggests that the proposed extension of the PLI scheme could trigger similar growth in other sectors as well.
