PLI scheme to unlock India’s manufacturing capacity, generate jobs: Icra
- IBEF
- February 18, 2022
According to a ICRA report, the government's PLI scheme, which was introduced to encourage manufacturing, is expected to draw a capex of almost Rs. 4 trillion (US$ 53 billion) over the next five years, with the potential to employ over 3 million people in India.
The Centre announced the production-linked incentive scheme (PLI) spanning 14 major sectors of the economy with a total outlay of Rs. 3 trillion (US$ 39.75 billion) to improve India's manufacturing, job creation, import reduction, and export growth. Incentives are calculated based on incremental production or revenue or capital investment over a five-year period on average across industries.
PLI for semiconductor manufacturing is at Rs. 760 billion (US$ 10 billion), for auto industry is Rs. 259 billion (US$ 3.43 billion), and for solar PV module is Rs. 240 billion (US$ 3.18 billion).
Icra has examined the cumulative positive impact of the PLI plan in its newest sectoral strategy study, with a focus on manufacturing, which now accounts for 20-25% of total capex in India. The government has carefully selected the industries in light of India's rising demand (solar, semiconductors/electronics, vehicles, etc.) and they are crucial for developing manufacturing skills (semiconductors, telecom gears, medical devices).
Sectors under which PLI scheme have been announced currently constitute 40% of the total imports. The scheme, which spans 14 industries, has the potential to boost India's annual manufacturing capex by 15-20% starting in FY23. However, execution delays, rising funding costs, the availability of required infrastructure, and approval delays are all potential problems.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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