This vision led to the development of the PLI scheme by the government, and the initiative will play a pivotal role in providing impetus to India’s manufacturing. As a scheme that is outcome oriented and focused in its approach, policymakers have selected sectors in a way that allows the manufacturing sector to benefit optimally while keeping the overall objectives intact at the same time. In the Indian landscape, there are certain sectors that can help anchor the success of this scheme and the aim is to create global champions in these sectors.
The Government of India has implemented PLI schemes in 14 key sectors with an overall outlay of Rs. 1.97 lakh crore (USD 24 billion) and it has been specifically designed to attract investments in sectors of core competency and cutting-edge technology. The focus on these aspects will ensure efficiency and bring economies of scale to make Indian manufacturers push the productivity frontier and be competitive in domestic markets and exports. Changed geo political circumstances in the aftermath of COVID also positions India as a reliable supply chain partner. Further our country is at the cusp of a multi-year capex cycle which is expected to provide a major boost to the overall economy and the PLI scheme is giving a major impetus to this positive upcycle by developing the manufacturing infrastructure in the country.
Most PLI schemes were mobilised in 2021-22 after obtaining necessary approvals and selecting beneficiaries. Given that the tenure of the scheme is 5 years or more, most of these are in the initial stages of implementation. The existing PLI schemes come with a sunset clause and as one approaches the tenure of the scheme, the incentives are accordingly tapered to make the industry self-sufficient. The early response from the industry has been very encouraging.
With positive initial response from the industry, recent figures suggest that by FY-23, around Rs. 70,000 crores of investments have poured in across the PLI schemes. This investment is nearly 21% more than what was committed during this period. The value of actual production for FY 23 is around 3.75 lakh crores which is nearly 33% more than the targeted value of production during this period. In addition, the value of exports during this period under the scheme stands at around Rs. 2.6 lakh crores. While analysing this data, one should take two factors into consideration. Firstly, certain sectors such as ACC batteries, high energy solar PV modules and specialty steel are still in their gestation period. Secondly, we have just come out of the COVID-19 years when manufacturing within the country was severely impacted.As is evident from these figures, these schemes have garnered tremendous response from investors. This can be attributed to the non-discriminatory nature of PLI schemes by which foreign and domestic companies are provided a level playing field to avail the benefits of the scheme after meeting threshold targets of growth and production. This, in turn, has a clear multiplier effect in creation of jobs, increase of incomes and creation of ancillary industry. In large scale electronics manufacturing PLI, Apple Inc. is participating through three of its contract manufacturers viz. Foxconn, Wistron and Pegatron. Apart from Apple, Samsung is also participating actively in this scheme. In fact, the import of mobiles has come down drastically after the introduction of PLI schemes from 78% in FY 15 to just 4% in FY 23. There has been nearly a 100% increase in export of mobile phones in FY 23 compared to FY 22. PLI scheme has been a major contributor in the success of mobile manufacturing within the country. In IT hardware PLI, Dell and Flextronics are major players participating.Similarly, pharma sector PLI has Centrient, Cadila, CIPLA, Glenmark, Lupin as its major beneficiaries. Medical devices import has reduced substantially owing to investments made by companies such as Wipro GE, Phillips, Siemens etc. under the PLI scheme.
In the telecom sector, Samsung, Jabil, Flextronics, Commoscope, Nokia are some of the companies that have participated in the scheme. In the automobile sector, more than 40% of the approved beneficiaries of the PLI are headquartered overseas. Daikin, Nidec, Panasonic, Mitsubishi, LG are bringing in substantial investment in the white goods sector. In the labour-intensive food processing sector, the participation of industry has been overwhelming.
PLI schemes are committed to bring and nurture the entire manufacturing ecosystem in the identified sectors via the creation of forward and backward linkages. Of course, under PLI schemes, OEMs that have been selected as beneficiaries are into manufacturing of the identified products, but part of this process of manufacturing is undertaken through smaller players or MSMEs. Thus, the entire ecosystem of MSMEs derive benefits from the PLI schemes by associating themselves with the OEM manufacturers. This benefit is not restricted to financial incentives, but also encompasses technological absorption. Even though PLI schemes are seen as schemes designed for OEMs, MSMEs account for nearly 25% of the total beneficiaries selected across all PLI schemes.
In conclusion, PLI schemes in India are helping the country become a reliable supply chain partner. By providing financial incentives for the domestic production of certain goods, the PLI schemes help strengthen the domestic manufacturing ecosystem and form resilient supply chains. This strategy, in turn, will allow Indian companies to be globally competitive and help India’s transition to a high per capita income economy.
Disclaimer: This content is authored by Shri Ishtiaque Ahmed, Senior Adviser, NITI Aayog. Views expressed are personal.
