Rajesh Kumar Singh
If there is a lingering challenge in India’s remarkable growth story, it undoubtedly lies within the manufacturing sector whose share in India’s GVA continues to languish at about 17.4% which is less even than the share of agriculture. The government’s persistent efforts to invigorate this crucial segment have led to the introduction of various initiatives, and at the forefront is the Production Linked Incentives (PLI) scheme under the flagship Atmanirbhar Bharat Abhiyaan.
The PLI scheme, conceived with the aim of overhauling domestic manufacturing, seeks to amplify capacity and competence and create global champions. Its broader goals include job creation, attracting substantial investments, enhancing exports, and positioning India as a global manufacturing hub. Its multiplier effects can lead to a potential surge in the manufacturing sector’s contribution to the GDP, and to a seamless integration of domestic firms into regional and global production networks.
Since its inception, the PLI scheme has notched up significant achievements. With 746 applications approved, it has garnered investments totalling ?1.07 lakh crore. The impact on job creation has been substantial, with approximately 7 lakh jobs, both direct and indirect, generated. Furthermore, production and sales have soared to ?8.70 lakh crore, accompanied by an impressive ?4,415 crore in incentives disbursed. Direct beneficiaries include 176 MSMEs, spreading over 8 PLI sectors.
Spanning a seven-year period from FY 2021-22 to FY 2028-29, the PLI scheme has already attracted a staggering Rs 3 lakh crore in investment commitments across 14 key sectors, showcasing active participation from both domestic and international industry leaders including leading Indian and International companies such as Foxconn, Samsung, Wipro, Tata, Reliance, ITC, JSW, Dabur etc.
Notably, the PLI scheme has proven particularly effective in Smartphone manufacturing, contributing to a remarkable boost in mobile exports from almost nothing to $11 billion in 2022-23. Far reaching impact on the remaining 14 sectors is also anticipated over the next 2-3 years. Frequently expressed apprehensions in some quarters about the lack of adequate local value addition in sectors like mobile manufacturing (currently at 20%) are somewhat misplaced when we see the steadily increasing trend of localisation in this sector as well as in sectors like e-vehicles where domestic value addition (DVA) is mandated at a minimum of 50% or white goods where DVA is already at 45% and is targeted to reach as high as 75% by 2028-29.
Moreover, the PLI scheme design ensures that it triggers additional investments upfront with sales, (including exports) preceding the release of incentives. This means that in Net Present Value (NPV) terms the scheme is self sustaining and more than pays for itself once the revenue streams (in the form of GST and Direct tax collection) are accounted for against the incentives to be disbursed. This also ensures that there is little or no chance of units setting up shop and closing after obtaining the subsidy payments as is often the case that is made out against other subsidy linked government scheme.
The government has supplemented the PLI scheme with additional measures, including quality control, to fortify local manufacturing. This strategic approach has propelled the toy sector for example, with exports surging from $96 million to $326 million in 2022-23. Similarly, the defence sector, buoyed by policies like local procurement and the opening up of defence corridors has witnessed a substantial jump in exports from Rs 700 crore in 2014-15 to Rs 16,000 crore in 2022-23.
These successes signal the gradual development of a robust and self-sustaining ecosystem. The PLI scheme’s focus on advanced technologies is poised to upgrade the skills of the existing labour force, replace technologically obsolete machinery, and make the manufacturing sector globally competitive. Enhanced production volumes are meeting increasing consumer demand, particularly in telecom and networking products, where the scheme’s timely intervention facilitates faster adoption of 4G and 5G products across India.
Additionally, the PLI in green technologies like e-vehicle, solar panels etc. combined with measures on the demand side like the FAME scheme and mandates on increasing use of renewable energy, has helped India to exceed its NDC targets on renewable energy. The increased sales under PLI will necessitate improved logistical connectivity, a need addressed by the huge investments in our infrastructure using the PM Gati Shakti Master plan for providing multimodal connectivity to manufacturing zones across India. Cluster parks with plug-and-play infrastructure further support manufacturing in different regions.
An inclusive approach, achieved through close cooperation with states, is empowering industries and artisans in the hinterland of Bharat to be integral to India’s growth story. Initiatives like the one-district-one-product and SFURTI, a cluster-based scheme to enhance traditional industries, are turning perceived competitive disadvantages into short-term and long-term advantages for India and its industries.
The challenges posed by the pandemic and resultant global socioeconomic upheavals have affirmed the well-considered objectives of the PLI scheme. Its associated ecosystem ensures that India is strategically positioned to integrate with Global Value Chains (GVCs), contributing to supply chain diversification and enhanced national security in a turbulent global scenario. Indian manufacturers are now emboldened to transcend their comfort zones, aligning with the nation’s vision to emerge as global champions on the path to becoming a developed nation.
In conclusion, the PLI scheme stands as a pivotal force reshaping India’s manufacturing landscape. Its achievements underscore the transformative power of strategic initiatives and their potential to position India as a global economic powerhouse. As the scheme propels India into a future marked by innovation, sustainability, and inclusive growth, the nation stands poised at the cusp of a new era in manufacturing excellence.
(The writer is Secretary, Department for Promotion of Industry and Internal Trade, Government of India).
