- The PLI scheme was introduced in March, 2020 with an aim to strengthen the manufacturing in India and add to India’s contribution to the global supply chain.
- Ministry:
- MINISTRY OF NEW AND RENEWABLE ENERGY
- Objective:
- This scheme covers 14 sectors. It is targeted towards achieving considerable employment opportunities as well as driving industrial capital expenditure, or capex.
How does it work?
- Eligible companies in PLI get financial incentives according to the incremental sales they produce from products made in India.
- These incentives urge the companies to invest in modernization of their manufacturing skills and technologies and expansion of capacity.
How is it different from other traditional subsidies?
- Only limited sectors are eligible: The scheme has the potential to attract maximum investments and scale rapidly to provide the maximum returns in terms of incremental production, employment, and export.
- Time-bound pre-committed levels of investment and productions: Hence cannot be called a subsidy scheme.
- Focus on supporting upcoming technologies: That can be commercialised at a large scale like advanced chemistry cell batteries, electronic and technology products.
Sectors Under the PLI Scheme
- Mixed trend in all sectors:
- Slower sectors in terms of job creation:
- Textiles, solar modules, IT hardware, automobiles, advanced chemical cells (ACC), and specialty steel have witnessed a slow job creation process.
- Initial issues arise from the need to establish domestic manufacturing capabilities de novo.
- Success stories:
- Food processing and mobile phone manufacturing have outperformed.
- For example, smartphone exports reached $15 billion in 2023-24 with companies like Apple scaling up assembly operations in India.
- Challenges:
- Setting up manufacturing industries for the first time in specific sectors.
- Elitist eligibility criteria, dependence on imported machinery, and tariffs are a turn-off.
- It takes time to commission an industry, say in solar modules or ACC, which may take about 1.5 to 3 years.
- These industries like mobile manufacturing create ripples; large companies like Apple spurring ancillary industries, thereby creating opportunities for suppliers that are smaller in scale.
- For example, where there were no suppliers earlier to Apple, today it is procuring components from 14 Indian suppliers.
- Economic potential:
- CRISIL said that the PLI scheme would help unlock ₹3-3.5 lakh crore in industrial capital expenditure over the duration of the scheme and would contribute 8-10% of total capex in key sectors in the next 3-4 years.
- Critical perspectives:
- The critics claim that PLI would work like a subsidy and would not ensure any long-term competitiveness after the incentive is withdrawn.
- Sectoral adjustments:
- IT hardware just got an upgraded outlay. Renewals or adjustment are being considered in textile and drones sectors
- Reforms in the pipeline :
- Enhancing eligibility criteria along with increasing support in lagging sectors. Employment-linked output should be emphasized in under-performing sectors.
