Most Affordable IAS Coaching in India  

Whatsapp 93132-18734 For Details

What is PLI Scheme? UPSC CSE

PLI Scheme

Get Free IAS Booklet

Get Free IAS Booklet

Summary of PLI Scheme

The Production Linked Incentive (PLI) Scheme is a government initiative aimed at boosting domestic manufacturing and exports across various sectors. With an outlay of Rs. 1.97 lakh crore, the scheme targets 14 key sectors, including electronics, pharmaceuticals, and automobiles. It offers incentives of 4% to 6% on incremental sales over a period of five to six years. The PLI scheme has witnessed significant investment, exceeding Rs. 1.03 lakh crore, leading to production and sales worth Rs. 8.61 lakh crore. Additionally, it has generated over 6.78 lakh jobs, with exports surpassing Rs. 3.20 lakh crore. Despite its successes, the PLI scheme faces challenges such as the need for a robust monitoring mechanism and coordination among stakeholders. However, it remains a critical tool in India's journey towards self-reliance and economic growth.

The PLI Scheme, or Production Linked Incentive Scheme, is a government initiative aimed at boosting domestic manufacturing and exports across various sectors in India.

The PLI Scheme offers incentives of 4% to 6% on incremental sales over a period of five to six years to eligible companies manufacturing specified goods in India.

The PLI Scheme covers 14 key sectors, including electronics, pharmaceuticals, automobiles, and textiles.

The main objective of the PLI Scheme is to make domestic manufacturing globally competitive, increase exports, and create job opportunities in India.

As of November 2023, the PLI Scheme has attracted over Rs. 1.03 lakh crore in investment, leading to production/sales worth Rs. 8.61 lakh crore.

Background of PLI Scheme

In response to India's need for job creation and the expansion of its manufacturing sector, the government introduced the Production Linked Incentive (PLI) Scheme. India's economy has predominantly been service-oriented, relying on high-skilled jobs. However, there's a growing recognition that incorporating a strong manufacturing base, particularly in low-skilled sectors, is crucial for providing employment opportunities on a large scale. This shift is essential to address the issue of jobless growth and to bolster the country's manufacturing capabilities.

The PLI Scheme aims to incentivize companies to invest in manufacturing sectors such as electronics, automobiles, and pharmaceuticals, thereby fostering economic growth and generating employment opportunities for millions of Indians. This is in line with India’s 5 trillion dollars economy goal. It will help India diversify its economy and create a more inclusive and sustainable model of development.

Introduction of PLI Scheme

What is the Production Linked Incentive Scheme (PLI)?
The PLI scheme is a government initiative designed to boost domestic manufacturing, reduce reliance on imports, and create job opportunities. Initially, it was introduced under the National Policy on Electronics by the IT Ministry, primarily to offer incentives to electronic companies manufacturing products like mobile phones, transistors, and diodes.

When was the PLI scheme launched?
Launched in April 2020, the scheme initially focused on three industries: Mobile and allied Component Manufacturing, Electrical Component Manufacturing, and Medical Devices. Later, it was extended to cover 14 sectors.

How does the PLI scheme work?
Under the PLI scheme, both domestic and foreign companies receive financial rewards for manufacturing in India, based on a percentage of their revenue over a period of up to five years. These incentives are calculated on the basis of incremental sales. In certain sectors like advanced chemistry cell batteries, textile products, and the drone industry, incentives are determined by sales, performance, and local value addition over five years.

The 14 sectors covered by the PLI scheme include

  1. Mobile Manufacturing and Specified Electronic Components
  2. Critical Key Starting Materials/Drug Intermediaries & Active Pharmaceutical Ingredients
  3. Manufacturing of Medical Devices
  4. Automobiles and Auto Components
  5. Pharmaceutical Drugs
  6. Specialty Steel
  7. Telecom & Networking Products
  8. Electronic/Technology Products
  9. White Goods (ACs and LEDs)
  10. Food Products
  11. Textile Products: MMF segment and technical textiles
  12. High efficiency solar PV modules
  13. Advanced Chemistry Cell (ACC) Battery
  14. Drones and Drone Components

Features of the PLI Scheme

Objectives of the PLI Scheme

Recent development

Challenges Faced by PLI Scheme

  1. Monitoring and Evaluation Mechanism:
    • Lack of a robust mechanism for monitoring and evaluating manufacturers' compliance with scheme requirements.
    • Need for clear criteria and independent audits to verify incremental production, sales, and value addition.
  2. Coordinated Approach:
    • Requirement for coordination among ministries, departments, and stakeholders to prevent policy conflicts and duplication.
    • Need to align PLI schemes with other existing or proposed initiatives like Make in India and Digital India.
  3. Supportive Ecosystem (a sudden surge in investment with a long term gap of necessary tools):
    • Necessity for infrastructure, logistics, finance, and skilling support to enable manufacturers to scale up production and exports.
    • Addressing bottlenecks and gaps in the ecosystem through reforms and investments.
  4. Dynamic Design:
    • Requirement for a responsive design to adapt to changing market conditions and consumer preferences.
    • Periodic review and revision of PLI schemes based on stakeholder feedback.

Additional Challenges of Immediate Concern

Conclusion of PLI Scheme

As India strives towards achieving its vision of "Atmanirbhar Bharat," it's imperative to address the challenges associated with demand and investment beyond the scope of the PLI scheme. Unemployment and skill development must be addressed in tandem with incentive schemes to foster holistic economic growth.

Recent data from the Centre for Monitoring Indian Economy (CMIE) underscores the urgency of the situation, with India's unemployment rate rising to 7.8% in October 2023. To gauge the effectiveness of companies benefiting from such schemes, establishing a comprehensive set of parameters is crucial.

Furthermore, incentives should not be limited to the manufacturing sector alone; they should encompass all relevant industries, taking into account various contributing factors.

Looking ahead, the World Bank projects a significant GDP growth for India, with an anticipated increase of 6.5% in 2024-25. However, to maintain this trajectory and compete with emerging competitors like China, Indonesia, and Bangladesh, further initiatives are essential.

According to the latest report on Global Trade Outlook and Statistics by the WTO, India contributes just 1.8% to global exports of goods. While the PLI scheme has shown some promise in addressing this, its effectiveness must be rigorously evaluated, focusing on metrics like job creation, cost per job, and reasons for limited success. Extending the scheme to new sectors necessitates a deep understanding of its limitations and a proactive approach to address underlying issues.

In navigating the path towards self-reliance, it's crucial for the government to assess policy initiatives like the PLI scheme comprehensively, ensuring they align with broader economic objectives and contribute significantly to India's manufacturing prowess and GDP growth.

Prelims PYQS of What is PLI Scheme?

Consider, the following statements: (2023)
Statement-I: India accounts for 3.2% of global exports of goods.
Statement-II: Many local companies and some foreign companies operating in India have taken advantage of PLI Scheme.
Which one of the following is correct in respect of the above statements?

(a) Both the statements are correct and Statement II is the correct explanation for Statement I
(b) Both the statements are correct and Statement-II is not the correct explanation for Statement-I
(c) Statement-I is correct but Statement-II is incorrect
(d) Statement-I is incorrect but Statement-II is correct

Correct Answer :(d) Statement-I is incorrect but Statement-II is correct

Main PYQS of What is PLI Scheme?

The Production-linked Incentive (PLI) scheme can be a game changer for exports from India. Substantiate. (2022/10 marks/ 150 words)

For Offline/Online Admission Call: 93132-18122

Call Us Whatsapp Us

Book your Free Class

Book your Free Class

ias-academy-form-m