How PLI scheme can be made more inclusive to boost domestic production

– By Gautam Mohanka

The PLI (Production-Linked Incentive) program primarily benefits manufacturers and industries in India. It is designed to promote domestic manufacturing and attract investments in key sectors such as electronics, pharmaceuticals, automobiles, and textiles. The program offers financial incentives to eligible manufacturers based on their incremental production over a specified base year. These incentives encourage companies to expand their manufacturing capabilities, increase production volumes, and enhance technological capabilities. As a result, the PLI program aims to boost domestic production, reduce import dependence, create employment opportunities, and attract foreign investments.

While the program benefits various industries, its impact varies depending on the sector. For example, in the electronics sector, the PLI program benefits manufacturers of mobile phones, electronic components, and semiconductor fabrication. Similarly, in the pharmaceutical sector, the program focuses on specific drug categories to encourage their production within the country.

For India to reduce its imports and encourage domestic players to enhance production, the government should and is focusing on strategizing ways to make the PLI scheme more inclusive. The government can consider expanding the scope of industries and sectors eligible for the PLI scheme to include a wider range of sectors beyond traditional manufacturing. This could encompass emerging sectors such as renewable energy, electric vehicles, biotechnology, and advanced technology industries. Separate provisions can be created within the PLI scheme to incentivize Micro, Small, and Medium Enterprises (MSMEs). This can be achieved by introducing lower investment thresholds, simplified application processes, and dedicated support mechanisms for MSMEs to participate and benefit from the scheme.

There should also be a smooth implementation of region-specific incentives to promote industrial development in underdeveloped or backward regions. This could involve providing additional incentives or higher incentive rates for investments made in these regions, thus reducing regional imbalances.  There should be flexibility in the minimum investment requirements for different sectors, allowing businesses of varying sizes to participate. This could include tiered investment slabs or customized investment criteria based on the nature of the industry.

There should be a keen focus on emphasizing skill development and technological upgradation. Alongside the PLI scheme, there should be a focus on supporting skill development programs and technology upgradation initiatives. This will help enhance the capabilities of domestic manufacturers, making them more competitive in both domestic and international markets. The players across the industry, with support from the government, should ensure streamlined and efficient implementation of the PLI scheme by reducing bureaucratic hurdles, simplifying application processes, and establishing a robust monitoring mechanism to track the progress and outcomes of the scheme.

There should be dynamic collaborations between industry players, research institutions, and academia to foster innovation, research, and development, which will drive technological advancements and improve the competitiveness of domestic manufacturers. It is important to note that the effectiveness of any measure will depend on various factors, including sector-specific dynamics, global market conditions, and policy implementation. Regular monitoring and evaluation of the PLI scheme’s outcomes can help identify areas for improvement and make necessary adjustments to achieve the goal of reducing imports and promoting domestic production.

(Gautam Mohanka is the Managing Director of Gautam Solar.)

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