Rajat Shah, IIFT

By Rajat Shah , IIFT

Under its Atma Nirbhar Bharat resolution, the Union Cabinet approved a productionlinked incentive scheme for "ten primary sectors" to improve India's manufacturing capabilities and exports in April 2020. This scheme has been allocated Rs 1.45 lakh crore, with cars and auto parts receiving the largest share, followed by advanced chemistry cell batteries, pharmaceuticals, and medicines. Then there are telecom and networking goods, textiles, and food. The list is completed by white goods, specialty steel, and high-efficiency solar PV modules. When taken together, this resolution, along with the three production-linked incentive schemes announced earlier for mobile handsets, active pharmaceutical ingredients, and main starting materials, and medical devices demonstrate the government's desire to promote manufacturing in the country following the failure of the "Make in India" initiative.

The salient elements of the direction seem to include the following:

Protect identified product areas through higher tariffs

Assiduously work towards introducing non-tariff measures to make imports difficult

Acknowledge the relevance of exports in the overall growth strategy but focus more on the domestic market

Promote offering manufacturing at home by

production incentives and

encourage investment

The scheme aims to render Indian manufacturers ‘globally competitive, attract investment in core competencies and cutting-edge technology, ensure efficiencies, build economies of scale, boost exports, and make India an integral part of the global supply chain. '

"PLI will encourage global leaders to create capacities in India, boosting FDI and creating jobs for the youth"

The sectors for PLI have been shortlisted based on their potential for economic growth, revenue, and employment generation. The extent of benefit to the rural economy and its criticality in the next few decades has also been considered while finalizing the sectors. Extremely strong manufacturing skills are also needed to compete with Asian competitors who have made staggering progress in one or more of these areas. It will also help India's rural development by ensuring constant electricity and digital connectivity.

Import substitution, export promotion,

costcompetitive and productive production, economies of scale, increased contribution to global value chains, and increased market share are all goals of the PLI scheme. Furthermore, it will encourage global leaders to create capacities in India, boosting FDI and creating jobs for the youth.

The scheme is supposed to produce better results because it is output-oriented and has "milestone-based incentivization, " as opposed to previous schemes that were more dependent on multiple input parameters. It would draw large sector players, advanced technology, and grow an interconnected ecosystem with production efficiency and economies of scale because of its output-oriented existence. Economic Survey 2021 Report

According to the survey, the PLI scheme would increase efficiencies, build economies of scale, boost exports, create a favorable manufacturing environment, and make India an integral part of the global supply chain, especially in the ten sectors targeted by the scheme.

The government has set aside the largest amount of incentive for the vehicle and part industry, totaling 57,042 crores, under the scheme. A total of Rs. 40,951 crores had been allocated to the mobile sector as a tax break. Advance cell chemistry batteries (Rs 18,100 crore), computer and technology products (Rs 5,000 crore), prescription drugs (Rs 15,000 crore), and telecom and network products (Rs 12,195 crore) are some of the other sectors covered by PLI.

Textile products (worth Rs. 10,683 crores), food products (worth Rs. 10,900 crores), highperformance solar PV modules (worth Rs. 4,500 crores), white goods (worth Rs. 6,238 crores), and specialty steel (worth Rs. 6,322 crores) are also covered by the scheme. The scheme's initiator, the Ministry of Electronics and Information Technology, has accepted 16 proposals from domestic and foreign companies totaling Rs 11,000 crore in investment to produce cell phones worth Rs 10.5 lakh crore over the next five years. According to the NITI Rajat Shah , IIFTAayog, the country's minimum output as a result of the PLI schemes will be about INR 3.92 lakh crore in the next five years. From 2021 to 2022, the scheme can generate nearly 1.40 crore manmonths of jobs, essentially doubling the current workforce across industries. This will help our country's MSME sector develop even further.

Result of PLI on other countries

China, Vietnam, Korea, and other

manufacturing economies competing

with India had good trade-oriented industrial policies. They were paired with lower-wage jobs, labor law stability, lower enforcement, a great ecosystem, and tax and duty relief to encourage export. Factors such as complicated and time-consuming compliances, land and power availability, high capital costs, a shortage of qualified labor, a lack of emphasis on R&D, and a fragmented supply chain with heavy reliance on imports can all be blamed for India's stagnant manufacturing.

Apart from Samsung and Rising Star, the scheme's applicants include iPhone maker Apple's contract manufacturers Foxconn Hon Hai, Wistron, and Pegatron, as well as Apple's contract manufacturers Foxconn Hon Hai, Wistron, and Pegatron. Lava, Bhagwati (Micromax), Padget Electronics (Dixon Technologies), UTL Neolyncs, and Optiemus are among the domestic companies whose proposals have been accepted.

The mobile phone sector is expected to generate over 2 lakh direct jobs and nearly 6 lakh indirect employment opportunities in the next five years.

Though India is establishing itself as an investment destination, other countries are becoming more appealing and establishing themselves in response to shifting paradigms. In the current situation, the PLI scheme would offer a significant boost to global companies seeking to establish facilities outside of China.

This scheme would need to be properly assisted by an integrated solution that takes into account the entire manufacturing ecosystem. The greater challenge will be ensuring that investors who come to India under this scheme can successfully set up their businesses, with minimal delays and capital cost overruns. This will ensure that the scheme is implemented and run efficiently. This will ensure effective scheme implementation and business sustainability in the long run.

Some additional steps are essential to further power the ambition of USD5 trillion economy. They include the actual realization of ease of doing business, strong skilled resources base, simplification of labor laws, promotion of R&D initiatives, and check on the import duty of some of the key products in the initial years so as not to disrupt the current supply chains. The government should incentivize large players to set up research and innovation infrastructure in all these sectors to compete with global leaders.

In the current environment, such a strategy and an emphasis on export-oriented initiatives could seem improbable. However, as the global trade situation improves, India will be wellpositioned to reap the benefits of these industrialization initiatives in terms of large businesses, increased productivity, technological advancements, and job opportunities.