About 80% of the Production-Linked Incentive scheme (PLI), covering 14 sectors with a total outlay of ₹3 lakh crore, to boost manufacturing in the country is concentrated towards only three sectors — electronics, automobile and solar panel manufacturing.
Cumulatively, the scheme can enhance India’s annual manufacturing capex, currently at around 20-25%, by another 15-20% from FY23, while there will be reduction in net imports, as incremental revenues are expected at ₹35-40 lakh crore over the next five years, estimates rating agency ICRA.
Of the total outlay, half goes to the electronics value chain sector, auto components get 25% share, pharmaceuticals 9%, solar photovoltaic (PV) modules 8%, while telecom and networking, and food products get 4% each. Some additional allocation is also given to drones, textiles and steel.
Sectors under which the PLI scheme has been announced currently constitute 40% of the total imports and have the potential to generate employment for 30 lakh skilled and unskilled labour in India, says Rohit Ahuja, head of research and outreach at ICRA. "However, potential challenges are expected from execution delays, increasing funding costs, availability of requisite infrastructure and delays in approvals,” he says.
The PLI scheme, launched with the aim of incentivising manufacturing and reducing import dependency, is estimated to attract a capex of approximately ₹4 lakh crore for the next five years. Incentives are based on incremental production and revenue, spread over five years on an average across sectors. Some schemes are also linked to capital investments.
Commenting on specific allocations, ICRA notes that the PLI for semiconductor manufacturing is at ₹76,000 crore, as shortage of semiconductor chips is leading to major production delays in autos and electronics globally. These are critical components used in automobiles and electronic items such as mobile phones, smartphones, televisions, washing machines, refrigerators, etc.
For automobiles, the Cabinet has approved ₹25,900 crore out of the earmarked ₹57,000 crore and bids for the same have been closed. Additionally, the PLI for advanced chemistry cell (ACC) battery is estimated at ₹18,100 crore, with incremental production estimated at 50 GW.
The PLI allocation of solar PV modules has been increased to ₹24,000 crore from the earlier ₹4,500 crore, and considering India’s ambitious plans to expand solar generation, this scheme may continue to attract additional allocation every year. For pharma, an outlay of ₹24,900 crore has been further bifurcated into ₹6,900 crore towards key starting materials/ drug intermediates (KSMs/DIs) and active pharmaceutical ingredients (APIs), ₹15,000 crore for pharma sector, and the balance ₹3,000 crore towards bulk drug parks.
Apart from this, ₹12,200 crore has been allocated to telecom, food processing has been given an outlay of ₹10,900 crore, textile exports of ₹10,700 crore, specialty steel ₹63,00 crore, and drone segment ₹120 crore.
“Globally, India’s manufacturing output as a percentage of GDP is comparable with developed economies like the United States, the European Union and developing economies like Russia and Brazil, however, it is way behind China. Massive opportunities are emerging for India, as the world looks to diversify away from China and the PLI scheme is a step in the right direction,” says Ahuja.
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