Production Linked Incentive Scheme
Kartavya Desk Staff
Syllabus: Economics
Source: PIB
Context: India’s Production Linked Incentive (PLI) Scheme, launched in 2020, aims to transform the country’s manufacturing sector into a global hub by encouraging investments, innovation, and self-reliance.
What is the PLI Scheme?
The PLI Scheme incentivizes companies (domestic and foreign) to manufacture in India by offering financial rewards based on incremental production and revenue over five years. Initially targeting three industries, it was later expanded to 14 critical sectors to drive import substitution, employment generation, and high-tech industrial development.
Features and Sectors Covered
• Features: Performance-driven financial incentives. Promotes advanced technologies and economies of scale. Focus on self-reliance and boosting exports. Encourages job creation and import substitution.
• Performance-driven financial incentives.
• Promotes advanced technologies and economies of scale.
• Focus on self-reliance and boosting exports.
• Encourages job creation and import substitution.
• Sectors Covered: Large-scale electronics manufacturing (LSEM). Pharmaceuticals and medical devices. Automobiles and auto components. Telecom and networking products. Renewable energy and solar PV modules. Advanced chemistry cell (ACC) batteries. White goods, drones, textiles, food products, and specialty steel.
• Large-scale electronics manufacturing (LSEM).
• Pharmaceuticals and medical devices.
• Automobiles and auto components.
• Telecom and networking products.
• Renewable energy and solar PV modules.
• Advanced chemistry cell (ACC) batteries.
• White goods, drones, textiles, food products, and specialty steel.
Budget Outlay:
• Total allocation: ₹1.97 lakh crore (~$24 billion).
• Strategic funding across 14 sectors to enhance domestic manufacturing, exports, and technological development.
Achievements and Impact:
• Overall Impact: ₹1.46 lakh crore investments realized by August 2024. ₹12.50 lakh crore production generated. ₹4 lakh crore exports and 9.5 lakh jobs created.
• ₹1.46 lakh crore investments realized by August 2024.
• ₹12.50 lakh crore production generated.
• ₹4 lakh crore exports and 9.5 lakh jobs created.
• Sector-Specific Achievements: Electronics: Transition from a net importer to a net exporter of mobile phones. Production grew to 33 crore units (2023-24), with exports reaching 5 crore units. Pharmaceuticals and Medical Devices: India became the 3rd largest producer by volume, exporting 50% of production and reducing import dependency on bulk drugs. Automotive: Attracted $8 billion in investments and boosted production of high-tech automotive components. Renewable Energy: Solar PV module production expanded with 65 GW manufacturing capacity under the second tranche. Telecom: Achieved 60% import substitution and became a major exporter of 4G and 5G equipment. Drones: Sector witnessed seven-fold growth, driven by MSMEs and start-ups.
• Electronics: Transition from a net importer to a net exporter of mobile phones. Production grew to 33 crore units (2023-24), with exports reaching 5 crore units.
• Pharmaceuticals and Medical Devices: India became the 3rd largest producer by volume, exporting 50% of production and reducing import dependency on bulk drugs.
• Automotive: Attracted $8 billion in investments and boosted production of high-tech automotive components.
• Renewable Energy: Solar PV module production expanded with 65 GW manufacturing capacity under the second tranche.
• Telecom: Achieved 60% import substitution and became a major exporter of 4G and 5G equipment.
• Drones: Sector witnessed seven-fold growth, driven by MSMEs and start-ups.
Challenges:
• Limited Value Addition: Over-reliance on assembly rather than end-to-end manufacturing.
• WTO Constraints: Rules limit tying incentives to domestic value addition.
• Ambiguity in Disbursal: Lack of standardized parameters for fund allocation.
• Data Gaps: Absence of centralized databases for tracking outcomes.
• Complex Supply Chains: Difficulty in developing high-tech industries like semiconductor manufacturing.
Way Ahead:
• Policy Evaluation: Assess cost per job, production outcomes, and export growth.
• Transparent Incentives: Standardize criteria for fund disbursal and maintain accountability.
• Strengthening Value Addition: Focus on entire supply chains to deepen domestic manufacturing.
• Database Development: Create centralized systems for tracking investments, jobs, and exports.
• Expand Sectors: Target emerging industries like green hydrogen, semiconductors, and AI.
Conclusion:
The PLI Scheme has significantly bolstered India’s manufacturing capabilities, attracting investments, increasing production, and fostering innovation. Addressing challenges and building a robust ecosystem will ensure sustained growth and secure India’s position as a global manufacturing powerhouse.
Insta Links:
• Consider, the following statements: (UPSC-2023)
Statement-I: India accounts for 3.2% of global export of goods.
Statement-II: Many local companies and some foreign companies operating in India have taken advantage of India’s ‘Production-linked Incentive’ scheme.
Which one of the following is correct in respect of the above statements?
• Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I
• Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I
• Statement-I is correct but Statement-II is incorrect
• Statement-I is incorrect but Statement-II is correct
Answer: d)