The Production Linked Incentive – Journey so Far

Slowing Investment in Key Sectors Under PLI Scheme in India

Investment in key sectors identified to boost domestic manufacturing under the Centre’s Production-Linked Incentive (PLI) scheme is decelerating just a year after their launch. A review report by an inter-ministerial panel, which periodically assesses the scheme, indicates that investment growth has slowed significantly in textiles, IT hardware, and specialty steel this financial year.

The government had projected investments worth ₹49,682 crore for FY24, with 61.8% (over ₹30,695 crore) achieved across all 14 sectors during the first nine months of the financial year. Progress has also been sluggish in medical devices, automobiles and auto components, ACC batteries, and white goods.

By FY23, ₹75,917 crore was invested under the PLI scheme in India, surpassing the ₹60,345 crore target. This led to ₹5.96 trillion in production/sales and 367,000 direct jobs, exceeding targets of ₹5.78 trillion and 254,000 jobs. The PLI scheme aims to make India a manufacturing powerhouse, enhance domestic goods’ competitiveness, create jobs, reduce imports, and boost exports.

In the fiscal year 2023–24, the PLI scheme in India disbursed only 44% of the earmarked funds, with ₹6,800 crore reaching recipients out of the projected ₹11,000 crore. This shortfall highlights unclaimed or unused allocations. Contributing factors include amendments for more flexibility, stringent eligibility criteria, administrative hurdles, and delayed clearances. The ongoing restructuring of underperforming PLI schemes and variable sector performance also impacted disbursement rates. Efforts are underway to streamline processes and improve the scheme’s effectiveness for future years.

The Production Linked Incentive (PLI) Scheme has been a catalyst for growth in several key industries in India. As of 2024, the scheme has made notable strides in the following sectors:

• Automotive Sector: The initiative has accelerated the development and production of advanced automotive technologies, particularly in the realm of electric and zero-emission vehicles. It has successfully attracted substantial investments, fostering a robust supply chain both domestically and internationally.
• Electronics Manufacturing: The electronics sector has witnessed a surge in investments and exports, particularly in mobile phone manufacturing. The scheme’s beneficiaries have significantly contributed to the industry’s export figures, showcasing a remarkable increase in production volumes.
• Telecom: The telecom industry has benefited from the scheme through enhanced manufacturing of networking products. This has led to a substantial reduction in imports and a notable increase in domestic sales, alongside the creation of new job opportunities.

Future Outlook

Extension of Scheme Timeline: The PLI Scheme is extended until 2025–26, allowing companies to choose any five-year period within this timeframe to meet production targets. Extensions beyond this period depend on future government policy decisions, based on periodic reviews considering economic conditions and industry feedback.

Expansion to Additional Sectors: The government is considering expanding the PLI Scheme to include sectors like leather, bicycles, vaccine materials, and telecom products. Discussions are also advanced for sectors such as e-bike components, toys, and footwear, aiming to boost domestic manufacturing and job creation.

Increased Focus on MSMEs: Seven new PLI schemes have been approved to benefit MSMEs, with funding increasing from Rs 1,000 crore to Rs 2,500 crore, plus an additional Rs 4,000 crore incentive from the central government. By November 2023, the scheme had attracted over Rs 1.03 lakh crore in investments, significantly involving 176 MSMEs across various sectors. These PLI Scheme benefits are expected to drive growth, enhance competitiveness, and stimulate significant economic contributions from MSMEs.

Overall, the PLI scheme has attracted investments, boosted production and sales, and created jobs. It is considered a game-changer for India’s manufacturing sector and is expected to contribute significantly to the nation’s economic growth and self-reliance in the coming years.