What and Why of PLI schemes?

 By Dr.P.Sangeetha

“The state of the world today teaches us that self-Reliant is the only path”

PLI Scheme – Production Linked Incentive Scheme

(Potential to boost India’s Manufacturing)

PLI scheme is an initiative started by Government of India in March 2020 to not only encourage foreign companies to find workforce in the country to generate employment, but to make India a competitive player in the global market and boost domestic manufacturing & exports. Through the PLI scheme, the Government intends to promote its flagship Make-In India program and it is a part of Atmanirbhar Bharat.

 What is a PLI Scheme?

PLI stands for Production Linked Incentives. The Government provides incentives for the companies that shows incremental sales of Indian manufactured products. It is a reward for increased domestic production. India’s Finance Minister has announced an outlay of INR 1.97 Lakh Crores for PLI Schemes across 13 key sectors in the Union budget 2021-22.

Finance Minister has said in the Union budget 2022 presentation the Government’s flagship program PLI Scheme received tremendous response with a potential to create 60 lakh new jobs and additional production of 30 lakh crore jobs during next 5 years. Initially the scheme covered few select industries such as mobile phones & allied equipment manufacturing, pharmaceutical and medical devices. In FY 2020, the scheme benefitted approximately 150 manufacturing units generating incremental sales of Rs.46,400 Crore. In order to boost the economy in 2021, additional 10 sectors were included under the scheme.

 India’s PLI scheme resembles the “Piece rate” method, which has been in decline worldwide. The PLI scheme dates back to an era when it was common for producers to make only one product of an assembly line and companies were incentivized to raise output. As manufacturing grew more complex, incentives grew in complexity as well.

 PLI Schemes covers the following sectors:

S. No	Sector	Scheme Outlay
1	Automobiles  & Auto Components	INR 25,938 cr
2	Aviation (Drones & Drone Components)	INR 120 cr
3	Pharmaceuticals	INR 21,940 cr
4	Medical Devices	INR 18420
5	Advanced Chemistry Cell (ACC) Battery Storage	INR 18,100cr
6	Food Processing	INR 10,900 cr
7	Telecom & Networking Products	INR 12,195 cr
8	Textile Products	INR 10,683 cr
9	Speciality Steel	INR 6322 cr
10	White Goods (ACs & LED)	INR 6,238 cr
11	Electronic Components	INR 40,000 cr PLI for Large Scale Electronics Manufacturing INR 7,325 cr PLI for IT Hardware
12	Chemicals	INR 18,100 cr
13	Metals & Mining	INR 6,322 cr
14	Renewable Energy	INR 4,500 cr

 The PLI Scheme was mentioned in the World Bank’s Global Economic Prospects report.

The World Bank has pegged India’s economy to grow at 8.7% in the financial year 2022-23, beating its peers United States and China. India’s growth to 8.7% in FY 2022-23 and 6.8% in FY 2023-24 “to reflect an improving investment outlook with private investment, particularly manufacturing, benefiting from the Production-Linked Incentive (PLI) Scheme, and increases in infrastructure investment,” World Bank said in the report.

 Why did India choose to start PLI schemes?

The main focus of the government is on Increasing Exports and Reducing Import bills which falls in line with the Make in India initiative. The initiative did not get the momentum it needed when it was launched. The government intended to increase exports, reduce imports, create employment opportunities, drive consumption up, and attract more private investments through PLIs. The necessity for transformation in manufacturing was highlighted in the economic survey 2019-20. It advocated the country to be a global hub for assembly operation and value chain manufacturing. The focus on PLI and encourage MSMEs to play a greater role are the main mantras being followed in order to create a complete component ecosystem and make India an integral part of the global supply chains.

 PLI schemes would help the Indian manufacturers

·         To be globally competitive

·         To attract more investments in core competency areas and cutting-edge technology,

·         To ensure efficiencies, &

·         To create economies of scale and enhance exports.

In the next five years, $520 billion of production is estimated to happen through PLI alone. There is also an estimate which states that the workforce will double in the sectors mentioned under PLI.

 The government is very hopeful that the PLI impact in the introduced sectors will not only benefit the respective sector but will benefit the whole ecosystem.

India right now is in a sweet pot in terms of expanding manufacturing capacity and through PLI schemes, creates a large manufacturing ecosystem that would be at par with the largest economic powers of the world.

 We need to see if value addition through PLIs in India improves and the goal of reducing imports, increasing exports is realised alongside employment generation. While the direction and foresight of the scheme is promising, we will have to wait and see how it pans out.

  “May the direction of self-reliance give us a better tomorrow and free us from personal dependence”