Sambhav-2025

Approach Briefly introduce the Production Linked Incentive (PLI) Scheme. Analyze the role of the Production Linked Incentive (PLI) Scheme in transforming India's manufacturing sector Highlight the challenges and limitations. To conclude, suggest reforms.

Introduction

The Production Linked Incentive (PLI) Scheme was introduced by the Government of India in 2020 to promote domestic manufacturing, attract foreign investments, and reduce import dependence. Covering 14 key sectors, the scheme aims to make India a global manufacturing hub aligned with the Atmanirbhar Bharat (Self-Reliant India) initiative.

Body

Role of the PLI Scheme in Transforming India's Manufacturing Sector :

• Boost to Domestic Manufacturing: The PLI scheme promotes domestic production, particularly in high-value sectors like electronics, pharmaceuticals, and semiconductors.
  • India has become the second-largest mobile phone manufacturer globally, experiencing a surge in production fueled by the Production-Linked Incentive (PLI) scheme.
• Employment Generation: The scheme is estimated to generate over 60 lakh jobs (direct and indirect) across various sectors.
  • Example:
    • Textiles sector: The PLI scheme has promoted large-scale employment, particularly in Tamil Nadu, Gujarat, and Uttar Pradesh.
• Attracting FDI and Investment Growth: The scheme has enhanced India’s attractiveness for foreign investors, bringing FDI inflows into key industries.
  • Production Linked Incentive (PLI) Schemes witness over Rs. 1.03 lakh crore of investment till November 2023
• Import Substitution and Export Promotion: The PLI scheme reduces dependence on Chinese imports, especially in electronics, pharmaceuticals, and solar panels.
  • Example:
    • Active Pharmaceutical Ingredients (APIs): India was 80% dependent on China for APIs, but PLI has led to the revival of domestic production.
• Strengthening Key Sectors and Enhancing Competitiveness
  • The PLI scheme focuses on strategic sectors such as green energy, white goods (ACs & LEDs), and electric vehicles (EVs).
  • Example:
    • PLI for Electric Vehicles (EVs) & Advanced Chemistry Cell (ACC) Batteries: Investments worth ₹45,000 crore were announced for battery manufacturing.

Challenges and Criticism of the PLI Scheme

• Limited Sectoral Coverage: The scheme excludes certain labor-intensive industries like leather, handicrafts, and furniture, which could generate large-scale employment.
• High Capital Requirements and MSME Exclusion: The scheme benefits large firms but poses entry barriers for MSMEs due to its high investment threshold.
• Implementation and Disbursement Delays: Many sectors have seen slow approval processes and delays in fund disbursal.
• Dependence on Global Supply Chains: Despite the scheme’s intent, India still relies on imports for key raw materials.
  • Example: The global semiconductor shortage impacted India’s automobile and electronics industries, showing the need for stronger domestic supply chains.
• Risk of Market Distortion: Unequal distribution of incentives favors large firms while smaller manufacturers struggle to compete.

Conclusion

The PLI Scheme is a game-changer in boosting India’s manufacturing sector, creating jobs, and attracting foreign investments. However, implementation gaps and sectoral limitations need to be addressed to ensure inclusive growth. By expanding coverage, supporting MSMEs, and strengthening supply chains, India can emerge as a global leader in manufacturing and exports.