In a significant development, the Indian government has received applications from 38 entities, including industry giants like Asus, Dell, HP, and Foxconn, under the renewed Production Linked Incentive (PLI) scheme for IT hardware. This move aligns with the government’s vision of promoting domestic manufacturing, enhancing competitiveness, and generating employment opportunities. This article explores the key aspects of the PLI scheme for IT hardware and its potential impact on the Indian electronics industry.
The PLI Scheme – A Catalyst for Atmanirbhar Bharat
The PLI schemes, a cornerstone of the government’s “Atmanirbhar Bharat” (self-reliant India) initiative, aim to achieve several critical objectives:
- Making Domestic Manufacturing Globally Competitive: The primary goal of the PLI schemes is to enable Indian manufacturers to compete on a global scale.
- Creating Global Champions: By supporting domestic companies, the government seeks to create global leaders in manufacturing.
- Generating Employment Opportunities: These schemes are instrumental in providing job opportunities for the country’s youth, a crucial aspect of India’s socio-economic development.
Key Features of PLI Schemes
The PLI schemes are strategically designed to:
- Boost Domestic Manufacturing: They incentivize companies based on incremental sales from products manufactured in India, encouraging them to produce locally.
- Reducing Import Bills: These schemes aim to curb cheaper imports, thereby reducing India’s import bills.
- Enhancing Cost Competitiveness: By promoting domestic production, they aim to improve the cost competitiveness of Indian-made goods.
- Expanding Domestic Capacity and Exports: PLI schemes are expected to enhance domestic manufacturing capacity and boost exports.
PLI Scheme for IT Hardware – A Crucial Revival
Initially announced in February 2021 with an outlay of approximately Rs 7,300 crore over four years, the first version of the PLI scheme for IT hardware faced challenges. Only Dell and Bhagwati met the first-year targets. Responding to industry demands, the Union Cabinet approved a revised PLI scheme in May 2023, with a budget of Rs 17,000 crore, more than doubling the initial allocation.
The Impact of PLI 2.0 on IT Hardware Manufacturing
The enhanced PLI 2.0 is expected to attract major global IT hardware manufacturers to shift their production base to India. The average incentive over six years will be approximately 5%, a significant improvement from the previous 2% over four years. As the IT hardware industry aims for a production of $24 billion by 2025-26, with exports reaching $12-17 billion, this scheme plays a pivotal role in achieving the $1 trillion digital economy goal, including $300 billion in electronics manufacturing.
Addressing Import Dependency
Despite the government’s focus on electronics manufacturing, India has witnessed a surge in electronic goods imports. For instance, during April-June this year, electronic goods imports rose to $6.96 billion from $4.73 billion in the previous year. China dominates India’s imports of personal computers and laptops, accounting for 70-80% of the share. The PLI scheme intends to incentivize companies that manufacture specific components locally, thus reducing import dependency.
UPSC Mains Questions
- How does the PLI scheme for IT hardware align with the broader “Atmanirbhar Bharat” initiative, and what are its key objectives?
- What are the potential benefits of the enhanced PLI 2.0 for the IT hardware industry in India, and how does it contribute to the digital economy goal?
- Why has India seen a surge in electronic goods imports, and how does the PLI scheme aim to address this import dependency?
- How does the PLI scheme ensure accountability among participating companies, and what are the penalties for non-compliance?
