As we step into a new economic reality prompted by the COVID-19 pandemic, India has recognized a significant strategic opportunity. The nation seeks to establish itself as a pivotal player in global value chains, ensuring its manufacturing industry is a force to be reckoned with. One initiative accelerating this objective is the Production Linked Incentive scheme (PLI), which has been warmly received by the industry.
Understanding the Production Linked Incentive scheme (PLI)
Introduced by the Indian government across 14 critical manufacturing sectors, the PLI scheme represents a substantial stride towards accomplishing India’s strategic vision for its manufacturing sector. The scheme, boasting a budget of ₹1.97 lakh crore, promotes growth and sustainability within the targeted industries via an array of incentives and supportive measures.
Initially launched in March 2020, the PLI scheme initially focused on three sectors: Mobile and allied Component Manufacturing, Electrical Component Manufacturing, and Medical Devices. It has since expanded to include industries such as mobile manufacturing, pharmaceuticals, specialty steel, telecom & networking products, solar PV modules, advanced chemistry cell (ACC) battery, and more.
Incentives Under the PLI Scheme
The incentives offered under the scheme are calculated based on incremental sales. In certain sectors such as textile products, advanced chemistry cell batteries, and the drone industry, the incentive provided will be determined by sales, performance, and local value addition over a five-year span. This emphasis on Research & Development (R&D) investment ensures that the industry remains competitive on a global platform.
How the PLI is Stimulating Growth in India
This transformative approach to the manufacturing sector could significantly reshape global trade dynamics. By reducing dependency on single-source countries, it promotes the diversification of production sources. Rising production volumes, particularly within the telecom and networking sectors, are meeting consumer demand for 4G and 5G products.
Furthermore, the PLI scheme has shown successful results with 97% of mobile phones sold in India now being domestically manufactured, significantly reducing imports. As of September 2022, the PLI scheme has attracted investments of ₹4,784 crore, creating an additional 41,000 jobs.
Reducing Carbon Footprint and Boosting Free Trade Agreements
The PLI scheme’s focus on green technologies aims to decrease India’s carbon footprint, placing the country at the forefront of green policy implementation. Additionally, improved productivity is enhancing free trade agreements, leading to better market access. The increasing sales are also boosting demand for superior logistical connectivity.
Empowering Rural India
The Indian government is collaborating closely with states to empower industries and artisans in rural areas. Through initiatives such as “one-district-one-product”, it supports local businesses. Another initiative, “SFURTI”, aims to enhance traditional industries and contribute to the nation’s growth trajectory. These strategic moves position India as a key player in global manufacturing and trade, promising a bright future for its economy.