Impact of Production Linked Incentive Scheme on the Manufacturing Sector Manufacturing Sector- Overview
By Amrit Mohapatra, ABVSME, JNU The Hon’ble Finance Minister Ms. Nirmala Sitharaman, in her budget speech on 1st February 2020, announced the allocation of ₹ 1.97 lakh crores for the Aatmanirbhar BharatProduction Linked Incentive Scheme over a 5year period. To get the full picture of this announcement, we must look at the macroeconomic scenario with a historical analysis and the potential the manufacturing sector holds for future performance.
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The manufacturing sector contributes around 14.5% to the total Gross Value Added (Figure I). The contribution of manufacturing to total GVA has been declining in the past few years, as its rate of growth is less as compared to services and agriculture. In the past few years, the services sector saw tremendous growth in augmenting India to become a major leader of IT services exports. However, the direct transition of India from an agriculture-based economy to a services-based economy somehow neglected the growth of industry and manufacturing. The lack of entrepreneurship mindset, difficult business environment in India, complexity in regulatory process and anti-capitalism politics played a key role in suppressing the growth of the manufacturing sector. The problems due to overdependence on the services sector saw greater visibility after the outbreak of COVID-19.
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