From UPSC perspective, the following things are important :
Prelims level : PLI Scheme
Mains level : Paper 3- Analysing the importance of PLI Scheme
Manufacturing holds key to the economic prosperity of the country. The article examines the significance of Production Linked Incentive Scheme to boost manufacturing in India.
Need for increasing manufacturing capabilities
- The world of manufacturing is now more interconnected than ever before with all major industries—automobile, electronics, pharmaceuticals, textiles, etc—operating as a global value-chain.
- In order to integrate India as a pivotal part of this modern economy, there is a strong need to step up our manufacturing capabilities in sectors of high growth, including the cutting edge technology sectors.
- A strong and dynamic manufacturing sector will fuel India’s economic growth by allowing companies producing in India to penetrate effectively into the global supply chains across various sectors.
- Apart from enhancing exports, it will also reduce our import dependencies and spur domestic consumption.
- ‘Atmanirbhar Bharat’ has brought manufacturing to the centre stage and emphasised its significance in driving India’s growth.
Factors favouring India
- India offers an attractive domestic market, with a large population in the educated and earning segment.
- It also has a strong institutional framework which allows for a smooth functioning of the industry.
- A concerted effort towards attracting substantial investments for the creation of large manufacturing facilities, combined efficiency and economies of scale, can help Indian companies globally competitive and integrate with the global markets.
How Production Linked Scheme (PLI) will help achieve these objectives
- The Production Linked Incentive (PLI) Scheme is designed to incentivise incremental production for a limited number of eligible anchor entities in each of the selected sectors.
- These selected entities will invest in technology, plant & machinery, as well as in R&D.
- The scheme will also have beneficial spillover effects by the creation of a widespread supplier base for the anchor units established under the scheme.
- Along with the anchor unit, these supplier units will also help to generate massive primary and secondary employment opportunities.
- The sectors for PLI have been shortlisted on the basis of their potential for economic growth, extent of benefit to the rural economy, revenue and employment generation.
- A key benefit of the PLI Scheme is that it can be implemented in a very targeted manner to attract investments in areas of strength and to strategically enter certain segments of global value chains (GVCs).
- This will help bring scale and size in key sectors and create and nurture global champions.
- The scheme incentivises upcoming technologies that represent the biggest economic opportunities of the 21st century.
- The scheme intends to generate large-scale employment by incentivising the development of traditional, labour intensive sectors like Food Processing and Textiles.
- The current basket of Indian manufacturing constitutes of large volume of low-value products.
- The scheme aims to correct this by encouraging large manufacturers to bring technology and to build capabilities for high-value output thereby providing higher returns to the upstream producers.
- It will also enable an increase in exports.
- The scheme envisages globally-integrated manufacturing in sectors such as automobile and auto components, pharmaceuticals, telecommunications, white goods and steel.
- These are crucial sectors in terms of their strategic importance, contribution to the GDP and employment-generation potential.
Given the scale of incentives, which is around Rs 1,96,000 crore, the manufacturing sector of the country is set to transform in the next few years. Its contribution to the GDP will significantly improve, leading to unprecedented investment and job creation.