ON SOLID FOOTING

Buoyed by the success of the PLI scheme, the government is hoping to extend it to other product categories, thus' turning India into a manufacturing hub

The Indian government is considering proposals to extend the ₹35,000 crore Production-Linked Incentive (PLI) scheme to other product categories such as leather, bicycles, vaccine materials, and some telecom products, according to various media reports. While the proposal is still under discussion, the fact that the government is considering an extension is proof enough of the success of the PLI scheme.

During the coronavirus pandemic in 2020, the government announced a PLI scheme with the twin objective of encouraging local manufacturing and generating employment. The scheme is part of the government’s larger goal of achieving economic growth through manufacturing.

Under the PLI scheme, the government offers subsidies to companies to manufacture their products in India. Since PLI is linked to the company’s performance, incentives are provided on incremental sales. This could be either in the form of tax rebates or a reduction in import duties.

For instance, in the pharmaceuticals sector, the government hopes to increase the manufacture of active pharmaceutical ingredients in the country so that the country is less dependent on imports from China. To encourage this, the Centre announced an outlay of ₹15,000 crore for pharmaceutical manufacturing and another scheme outlay of ₹6,940 crore for making bulk drugs.

In addition to encouraging local manufacturing, the PLI scheme is expected to reduce import bills and invite foreign investments into the country.