Atmanirbhar Bharat Abhiyaan or the Self-reliant India campaign is the vision of new India envisaged by the Hon'ble Prime Minister Shri Narendra Modi. On 12 May 2020,
The aim is to make the country and its citizens independent and self-reliant in all senses. He further outlined five pillars of Aatma Nirbhar Bharat – Economy, Infrastructure, System, Vibrant Demography and Demand.
India is on its way to becoming self-sufficient. In March 2022, Indian exports surpassed $400 billion for the first time.
The Government of India also created the PLI scheme to help India become self-sufficient. The objective of this scheme is to boost domestic manufacturing, and also give incentives on incremental sales from products manufactured in domestic units. Apart from inviting foreign companies to set shop in India, the scheme also aims to encourage local companies to set up or expand existing manufacturing units.
What is a Production-Linked Incentive Scheme?
Assume you are the government and you want to increase the production of a specific type of product. The demand for such items isn't particularly high. But you believe that once they are manufactured in large quantities or sold at the appropriate price points, everything will be fine.
This is where you will use PLI or a production-linked incentive scheme. The PLI is an old and popular tool used by governments to encourage the production of goods deemed necessary for social good, taxation, or job creation.
Initially, this scheme has targeted three industries – mobile manufacturing and electric components, pharmaceutical (critical key starting materials/active pharmaceutical ingredients), and medical device manufacturing. Later this concept has expanded with schemes rolled out for multiple sectors to boost India’s manufacturing capabilities and encourage export-oriented production.
As these sectors are labour intensive and are likely, and the hope is that they would create new jobs for the ballooning employable workforce of India.
As of November 2021, the PLI schemes covered 13 sectors with a total budgeted outlay of INR 1970 billion (US$26.48 billion)
Each PLI scheme is applicable for a four to six-year duration period, depending on the sector.
It is envisaged that India’s total industrial production will increase by over US $520 billion during the period covering PLI policy implementation. Additionally, the government is also working on reducing the compliance burden, improving the ease of doing business, creating multi-modal infrastructure to reduce logistics costs, and constructing district-level export hubs.
How this scheme will work?
The PLI schemes provide eligible manufacturing companies incentives ranging from four to six percent on incremental sales over the base year of 2019-20 for a four to six-year period.
As a part of this scheme for mobile and electronic equipment manufacturing, an incentive of 4-6 per cent is planned for electronics companies that manufacture mobile phones and other electronic components such as transistors, diodes, thyristors, resistors, capacitors and nano-electronic components such as micro-electro-mechanical systems.