How PLI schemes have turned the tables of new India’s Economic Growth in Amrit Kaal?

Navigating the unpredictable seas of global manufacturing, India’s reliance on foreign imports has often felt like walking a tightrope—challenging and fraught with uncertainty. The COVID-19 pandemic brought significant challenges to this dependence. The disruption in global manufacturing highlighted the vulnerabilities of our supply chains and underscored the need for self-sufficiency. Discussions with my father, who has over three decades of experience in the manufacturing sector within a public sector-owned fertilizer and pharmaceutical company, have deepened my understanding of the urgency for change. I have long felt the need to emphasize this urgency—a shift towards strengthening our domestic capabilities and reducing dependencies. Reading about the Indian government’s announcement of the Production-Linked Incentive (PLI) schemes, as part of the Atmanirbhar Bharat initiative, feels like witnessing the dawn of a new era, and I could not be happier.

Unveiling the PLI Schemes: A Beacon of Hope

The genesis of the PLI schemes is intertwined with the challenges that the pandemic unleashed, disrupting economies and exposing the perils of over-dependence on global supply chains. Designed to invigorate the Indian manufacturing sector, these schemes aim to promote domestic production while making it globally competitive. By providing financial incentives based on incremental sales from domestically manufactured products, the PLI schemes span across pivotal sectors like electronics, pharmaceuticals, automobiles, and textiles, among others. The PLI schemes have been welcomed by industry leaders and experts, who see them as a game-changer for the Indian economy. According to a report by the consulting firm, KPMG, the PLI schemes have the potential to create up to 10 million jobs in the country and increase its GDP by up to 1.5%.

Another benefit of the PLI schemes is that they promote exports, which are critical to the country’s economic growth. India’s exports have been growing steadily over the years, and the PLI schemes are expected to further boost this growth. The schemes provide incentives to companies that export goods to other countries, which helps to increase the country’s foreign exchange earnings and reduce its trade deficit. The PLI schemes are also expected to promote sustainable development, as they encourage companies to adopt environmentally friendly practices and reduce their carbon footprint. The schemes provide incentives to companies that use renewable energy sources, reduce waste, and implement sustainable manufacturing practices. This is in line with the government’s vision of achieving sustainable development and reducing the country’s carbon emissions.

The allure of these schemes has not only captured the imagination of domestic manufactures but has also piqued the interest of global investors. For instance, the push towards electronics manufacturing has seen tech giants expanding their operations within India’s borders, signaling a shift towards making India a hub for mobile and electronic component manufacturing. Similarly, the pharmaceutical sector, under the aegis of PLI schemes, is poised to reduce import dependencies by enhancing the production of active pharmaceutical ingredients (APIs) and medical devices.

The Drive for Manufacturing Excellence: Fostering Innovation beyond incentives

India’s Production-Linked Incentive (PLI) scheme operates on a straightforward yet powerful principle: to offer manufacturers incentives based on the incremental sales of products made in India for both global and domestic markets. With a hefty financial outlay of over Rs. 1.45 lakh crores planned to be invested over the coming five years, the overarching goal of the PLI is twofold—to firmly embed India within the global supply chains and to empower local manufacturers with the financial muscle to vie with other international manufacturing hubs.

Proponents of the PLI scheme are buoyant, underscoring its potential not just to catalyze the manufacturing sector but also to be a significant employment generator as companies amplify their local production capacities.

One of the earliest sectors to come under the PLI ambit was electronic manufacturing, with a whopping investment of Rs. 40,995 crores dedicated to it. Through this strategic move, India is poised to carve out its place as a global epicenter for mobile phone production. The commitment from smartphone behemoths like Foxconn, Wistron, Pegatron, and Samsung to make substantial investments under the PLI scheme paints a promising picture. Projections indicate that the approvals under the electronics PLI could trigger a production surge worth an estimated Rs. 11.5 lakh crores over the next five years, simultaneously generating upwards of 200,000 direct jobs in the sector.

The automotive industry is not far behind, with the recent green light for a PLI scheme for automobiles and auto components featuring a budget allocation of Rs. 26,000 crores. The target? To escalate India’s footprint in global auto exports from a modest 1% to a more competitive 3% within the next five years. Homegrown giants like Tata Motors and Mahindra, along with international players such as Kia and Hyundai, have already pledged investments, riding the wave of this initiative.

Parallelly, the critical pharmaceutical sector has seen the launch of a dedicated PLI scheme worth Rs. 15,000 crores. This initiative is designed to slash India’s import dependencies and establish the nation as a formidable hub of global pharmaceutical manufacturing.

Towards a Resilient and Prosperous India

However, the journey towards self-reliance is strewn with challenges. Effective implementation of PLI schemes is a Herculean task, requiring seamless coordination between government bodies and the private sector. Infrastructure development, ease of doing business, and fostering a culture of innovation are pivotal in realizing the full potential of these incentives. Moreover, vigilance against market distortions and ensuring equitable benefits for both large conglomerates and small enterprises will be crucial in maintaining the integrity and success of the PLI schemes.

Despite these hurdles, the ethos of Atmanirbhar Bharat through PLI schemes offers a beacon of hope. It’s a testament to India’s resolve to not just survive but thrive in the face of adversity. The narrative of Atmanirbhar Bharat, enriched by the PLI schemes, is not merely about economic policy; it’s a narrative of resilience, ambition, and the collective will of a nation to secure its destiny. As we navigate these changing tides, the vision of a self-reliant India is not just a distant dream but a tangible reality we are building, one policy, one investment, and one job at a time.