The Indian Union Cabinet’s recent approval of the revised Production Linked Incentive (PLI) scheme for IT hardware manufacturing signals a significant step towards boosting domestic production capabilities. This decision comes in the wake of notable strides made by India’s electronics manufacturing industry, which has successfully amassed a production worth over USD 105 billion.
Major Highlights of Updated PLI Scheme for IT Hardware
Originally notified in March 2021, the PLI scheme for IT hardware initially offered a 4% incentive for an incremental investment in domestic manufacturing to eligible firms. The Ministry of Electronics and Information Technology (MeitY) announced an enhanced incentive of 5% in the amended scheme. Moreover, an “additional optional incentive” has been introduced to encourage utilization of domestically-produced components.
Revised Budgetary Allocation and Duration
With a budgetary allocation of ₹17,000 crore, the updated PLI scheme for IT hardware runs for a tenure of six years. This extended duration offers companies a more substantial window to establish and grow their operations within India.
Growth Trajectory of Electronics Manufacturing in India
Over the past decade, India’s electronics manufacturing sector has grown at an impressive Compound Annual Growth Rate (CAGR) of approximately 17%. In 2023, India exported mobile phones worth more than USD 11 billion, securing its position as the world’s second-largest mobile handset manufacturer, next only to China.
Exploring the Production-Linked Incentive Scheme
The PLI scheme is a part of the ‘AatmaNirbhar Bharat Abhiyan’ (Self-Reliant India) initiative. It provides companies with incentives on incremental sales from products manufactured in India, from the base year. The scheme also encourages foreign companies to initiate their units in India.
The ultimate objective of this initiative is to make Indian manufacturing globally competitive and create global champions in manufacturing. The incentives are designed to spur domestic manufacturing in emerging and strategic sectors, curtail cheaper imports, reduce import bills, improve the cost-competitiveness of domestic goods, and augment domestic capacity and exports.
Sectors Identified for PLI
Union Budget 2021-22 announced an outlay of INR 1.97 lakh crores for the PLI schemes across 14 key sectors. These sectors have been selected based on their potential for revenue and job generation. The sectors include mobile manufacturing, medical device production, automobile and auto components, pharmaceuticals, drugs, specialty steel, telecom & networking products, electronic products, white goods such as ACs and LEDs, food products, textile products, solar PV modules, advanced chemistry cell (ACC) battery, and drones and drone components.