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A detailed analysis of PLI – Opinion News
As the government prepares to present the annual budget in the third week of July, there are expectations that the production-linked incentive (PLI) scheme, started by the Modi government in 2019, will be extended to more sectors. Before that happens, it is necessary to take stock to find out whether the disbursement of over 2 billion rupees involving 14 PLI worked. It was certainly a hit in smartphones, which was the first beneficiary of such a scheme in mid-2020. A global brand like Apple established a production base in the country and exports increased. In FY24, Apple’s production in India doubled to $14 billion. Now, one in every seven iPhones assembled in the world is made in India and more than 70% of production is exported to Europe, the USA and Asia.
But the other 13 PLI schemes don’t have much to show for it. According to available data, companies have so far made investments worth 1.07 billion rupees, against an outlay of more than 2 billion rupees. Of the expected incremental sales target of 40 billion rupees, only 17% has been achieved by December 2023. Similarly, of the direct employment potential of 1.15 million, around 43% has been achieved. The 13 sectors include high-efficiency solar photovoltaic modules, automobiles, ACC batteries, textiles, IT hardware and special steels. The government has adjusted the schemes in some cases, such as IT hardware, to make it more attractive to the industry. However, the big question is why the scheme was successful in a sector like smartphones, but not in other sectors, when the basic architecture was the same.
The answer may be that a one-size-fits-all approach does not work, as experience so far has shown. The PLI scheme for smartphones was conceived after more than two years of discussions with Apple, as the other major global manufacturer, Samsung, was already present in the country. The specifics of the scheme were adapted to suit Apple, which was not the case with other schemes. There was no clear objective in mind as to which companies would be targeted for locating in India. This becomes very clear in the case of self where the PLI aimed to promote Electric vehicles (EV). Although a number of national companies were selected, this year the government presented a different proposal VE policy to woo Tesla, where the incentive for the first three years is the granting of import rights. In IT hardware, where the blueprint had to be overhauled in 2023, the basic flaw was the assumption that what worked on smartphones would also work on IT.
First published on: 19/06/2024 06:15 IST