Impact of Production Linked Incentive Scheme on the Manufacturing Sector By Chetan Singh, IIFT Production-Linked Incentive or PLI scheme is a scheme that aims to give companies incentives on sale of products manufactured in domestic units i.e., manufactured in India itself. Launched in April 2020, the scheme was initially launched in correspondence to National Electronics Policy with the aim to boost manufacturing of electronic items like mobiles, laptops, semiconductor chips and related accessories related to Electronic Products Industry. The scheme was launched to reduce the import bills, dependency on countries like China and boost domestic manufacturing sector in compliance with Atmanirbhar Bharat policy to generate employment, self-reliance and overall, the Indian Economy. As of March 2021, the PLI scheme has been expanded to medical instruments, pharmaceutical, chemical, telecom, food processing and automobile sectors. The Government holds the vision to make India a 5 Trillion Dollar economy in next 4-5 years. The growth lessons learnt from China during Post-Mao period can be easily interpreted that it was the manufacturing sector boost of China in 1980s to the start of 21st century which helped it to become the Economic Powerhouse it is today. Looking further back into the history, rise of Europe and US can be primarily attributed to their respective Manufacturing Sectors. The absence of policy and long term vision for domestic manufacturing sector post independence is the primary reason that despite home to the largest youth population and enough skilled labour, meagre 17% contribution is their of Manufacturing sector to Indian GDP as compare to 40% in China. Government expects PLI scheme to boost India’s manufacturing by $520 billion in next 5 years. As
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“Make in India, make for the World” -PM Modi on PLI Scheme
in every sector major firms needs supplies from different vendor companies, PLI scheme will act as a support base for these MSME industries by helping them establish entire value chain. PLI scheme will also enhance the FDI flow into the covered sectors and will drive research and innovation along with manufacturing. In order to be eligible for PLI scheme, an applicant must commit to investing Rs. 10 cr (MSME) / Rs. 100 cr. ( others) to Rs. 1000 cr. for considered years. MSME sector holds share of 28.77% of country GDP (2016) whereas the contribution of manufacturing MSMEs stands at 33% in country’s total manufacturing Gross Value of Output (GVO) (2016). Also, almost 60% of MSMEs are operational in rural areas. Hence, through this scheme, government can ensure targeted development of rural economy and the investments will directly into the specific regions and belts. Manufacturing MSMEs contribute of 33% of employment across also MSME industries. The sectors covered under the scheme includes telecom, electronics, chemical, automobile. The following the import cost of these sectors and their proportion of total
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