Enhanced Production Linked Incentive for IT Hardware

• 19 May 2023

For Prelims: Production Linked Incentive (PLI), Compounded Annual Growth Rate (CAGR), Union Budget 2021-22.

For Mains: Announced Sectors for PLI, Growth of Electronics Manufacturing in India.

Why in News?

The Union Cabinet recently approved an updated Production Linked Incentive (PLI) scheme for IT hardware manufacturing in India.

• This move comes as India's electronics manufacturing industry has experienced significant growth, achieving a major milestone by crossing USD 105 billion in production.

What are the Major Highlights Related to Updated PLI Scheme for IT Hardware?

• Enhancements to the PLI Scheme for IT Hardware:
  • The PLI scheme for IT hardware was first notified in March 2021. The scheme provides upwards of 4% in incentives for incremental investment in domestic manufacturing for eligible firms
  • The Ministry of Electronics and Information Technology (MeitY), stated that the incentive has been increased to 5% in the updated scheme.
    • Additionally, an "additional optional incentive" has been introduced for the utilization of domestically produced components.
• Revised Budgetary Outlay and Duration:
  • The updated PLI scheme for IT hardware has been allocated a budgetary outlay of ₹17,000 crore. The scheme will have a tenure of 6 years, providing a longer-term incentive for companies to establish and expand their operations in India.
• Growth of Electronics Manufacturing in India:
  • Over the past eight years, the electronics manufacturing sector in India has experienced a compound annual growth rate (CAGR) of 17%.
  • In 2023, India surpassed USD 11 billion in mobile phone exports, solidifying its position as the 2^nd-largest mobile handset manufacturer globally, trailing only China.

What is the Production-Linked Incentives Scheme?

• About:
  • The Production-Linked Incentives (PLI) scheme is the latest addition to the list of reforms introduced under the aegis of the 'AatmaNirbhar Bharat Abhiyan' (Self-Reliant India) initiative.
  • The strategy behind the PLI scheme is to offer companies incentives on incremental sales from products manufactured in India, over the base year.
    • The scheme also invites foreign companies to set up units in India.
• Objective:
  • The scheme aims to make domestic manufacturing globally competitive and to create global champions in manufacturing
  • They have been specifically designed to boost domestic manufacturing in sunrise and strategic sectors, curb cheaper imports and reduce import bills, improve cost competitiveness of domestically manufactured goods, and enhance domestic capacity and exports.
• Announced Sectors for PLI:
  • The Union Budget 2021-22 announced an outlay of INR 1.97 lakh crores for the PLI schemes for 14 key sectors which have been shortlisted on the basis of their potential for revenue and employment generation.
    • The 14 sectors are mobile manufacturing, manufacturing of medical devices, automobiles and auto components, pharmaceuticals, drugs, specialty steel, telecom & networking products, electronic products, white goods (ACs and LEDs), food products, textile products, solar PV modules, advanced chemistry cell (ACC) battery, and drones and drone components.

Source: TH