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As India approaches the unveiling of its Budget 2024, the spotlight is firmly on the Production-Linked Incentive (PLI) schemes, which have been instrumental in revitalizing the manufacturing sector and strengthening supply chains. The government's proactive steps in enhancing these schemes signal a commitment to bolstering India's economic growth, increasing employment, and positioning Indian industries on the global stage.
In a significant move, the Indian government has hiked the allocation for the PLI scheme to ₹6,200 crore during the interim budget for FY25, marking a 33% increase from the previous year’s estimate of ₹4,645 crore. This substantial boost underscores the government's dedication to supporting manufacturing and supply chains across the 14 sectors currently covered, which include mobile phones, pharmaceuticals, automobiles, and electronic products.
Since its initiation in 2021, the PLI scheme has attracted investments exceeding ₹1.03 lakh crore, leading to production and sales worth ₹8.61 lakh crore. This has resulted in the creation of over 6.78 lakh jobs, both directly and indirectly. However, it's important to address concerns about limited employment generation in sectors such as leather, garments, handicrafts, and jewelry. These industries hold significant potential for job creation, especially for lower-income households, and should be considered for inclusion in future expansions of the scheme.
Experts emphasize the need to extend the PLI scheme to additional sectors ahead of the Interim Budget. Sectors like leather, garments, handicrafts, and jewelry possess untapped potential to contribute significantly to employment and economic growth. Expanding the scheme to these areas could attract investments, enhance efficiency, and position Indian companies as globally competitive entities.
The PLI scheme has already driven exports beyond ₹3.20 lakh crore, with major contributions from electronics manufacturing, pharmaceuticals, food processing, and telecom products. The scheme's long-term goal is to boost production, employment, and overall economic growth over the next five years. Continued support and expansion of the scheme can significantly enhance India's export capabilities and economic resilience.
To date, around ₹4,415 crore in incentives have been disbursed under PLI schemes for eight sectors, including large-scale electronics manufacturing, IT hardware, bulk drugs, medical devices, pharmaceuticals, telecom, food processing, and drones. A total of 746 applications across 14 sectors have been approved, with an anticipated investment exceeding ₹3 lakh crore. Notably, 176 MSMEs are among the beneficiaries, highlighting the scheme's reach and impact.
The PLI scheme, launched in March 2020 as part of the Make in India initiative, aims to boost Indian manufacturing, reduce dependence on imports, and increase employment in labor-intensive sectors. While the existing PLI schemes cover various industries, there is a growing demand to extend the benefits to small and medium-sized enterprises (SMEs).
As of January 2024, 746 applications have been approved across 14 sectors, with an expected investment of ₹3 lakh crore. Notably, 176 MSMEs have directly benefited from the scheme in sectors such as bulk drugs, medical devices, pharmaceuticals, telecom, white goods, food processing, textiles, and drones.
Small-scale enterprises face unique challenges, including limited access to capital, technology, and global markets. A dedicated PLI scheme for SMEs is crucial to address these issues. Firstly, SMEs often struggle to compete with larger players due to economies of scale. A targeted PLI can level the playing field. Secondly, SMEs are significant contributors to employment. A tailored PLI can encourage job growth and skill development. Last but not the least, SMEs drive innovation and agility. Incentives can spur R&D and technology adoption. A tweak in the scheme can help us in addressing all the three issues.
The Eligibility Criteria should allow SMEs to meet specific criteria (such as turnover, investment, and employment) to qualify, focusing on labor-intensive sectors like textiles, handicrafts, agro-processing, and light engineering. The Financial incentives can be based on incremental sales or production, with graduated benefits to encourage sustained growth. The SMEs should be encouraged for adoption of modern technology, automation, and digitalization to improve efficiency and quality. The incentives should be tied to export performance to boost SMEs' participation in global markets. Finally the scheme should mandate to allocate a portion of incentives for skill training and capacity building to enhance SMEs' competitiveness.
As we await the Budget 2024, the PLI scheme's expansion to additional sectors and the introduction of a dedicated scheme for SMEs remain key expectations. These measures can invigorate the small-scale sector, create jobs, and foster innovation, driving India's economic growth and global competitiveness.
This article first appeared in The Economic Times on 15 Jul 2024.