Ahead of the vote-on-account on February 1, India Inc has appealed to Finance and Corporate Affairs Minister Nirmala Sitharaman to extend the production linked incentive (PLI) scheme to more sectors in her upcoming Budget speech. Introduced in November 2020 as part of the Government’s “Aatmanirbhar Bharat” package during the pandemic, the PLI scheme provides fiscal incentives to both domestic and foreign manufacturers in specific sectors to encourage local production.
The Confederation of Indian Industry (CII) has proposed that the PLI scheme should cover labour-intensive sectors such as apparel, toys, and footwear to boost employment. Additionally, they recommend expanding the scheme to sectors with high imports but domestic capabilities, like capital goods and chemicals, in order to reduce import dependence. The PHD Chamber of Commerce and Industry (PHDCCI) has also suggested including medicinal plants and handicrafts in the PLI scheme.
Currently, there are 14 sectors listed under the PLI scheme, including telecom instruments, pharmaceuticals, solar cells, ACC batteries, auto components, mobile manufacturing, specialty steel, food products, white goods (ACs & LED), and medical devices. These sectors account for approximately 40% of India’s total goods imports.
The government has allocated $26 billion for the PLI scheme over a period of five years, with the aim of enhancing India’s manufacturing and export capabilities while reducing import dependence. It is estimated that this investment will generate an additional production value of $140.6 billion in the economy over the same period.
Although the PLI scheme has seen success in the mobile manufacturing sector, with major smartphone companies shifting their supplier bases to India, progress in other sectors has been relatively limited. Delays in approvals and setting up manufacturing sites have hindered the scheme’s full impact on trade activity. However, experts believe that the PLI scheme has the potential to bolster the viability of export-oriented businesses and contribute to reducing India’s trade deficit.
The upcoming Budget speech will present an opportunity for the Finance Minister to address the demands of India Inc and provide a strategic roadmap for further expanding the PLI scheme, thus advancing the country’s manufacturing and export capabilities.
