scorecardresearch

Govt planning 7-8 more PLI schemes to expand coverage

The schemes will be launched at a time when India’s economic growth faces strong external headwinds, mainly the Ukraine war and global growth slowdown. Several agencies have now scaled down their FY23 forecasts for the country.

Govt planning 7-8 more PLI schemes to expand coverage
The move follows ‘good response’ to the 14 such schemes, which have been announced since 2020 and are estimated to lead to an incremental manufacturing of more than $500 billion over five years. (File)

The government is planning to launch 7-8 production-linked incentive (PLI) schemes in the next round soon in a bid to further expand the coverage across critical manufacturing sectors, stimulate economic growth and spur job creation, official sources said.

The new PLI schemes will cover segments, including textiles, electronic components, furniture, toys and leather, said the sources. Tens of thousands of crores would be extended as incentives. The government intends to make fresh budgetary allocation for the schemes, apart from using savings from the earlier PLI schemes.

Also Read| Best Agrolife Ltd receives A-credit rating from care ratings

The move follows ‘good response’ to the 14 such schemes, which have been announced since 2020 and are estimated to lead to an incremental manufacturing of more than $500 billion over five years. The new schemes will be rolled out, as part of broader government effort to push for growth without exacerbating inflationary pressure, said one of the sources.

The government had approved three PLI schemes for mobile & specified electronic components, pharmaceuticals API (active pharmaceutical ingredients) and medical devices in the first round in March 2020. The total initial outlay for these three programmes was to the tune of `51,311 crore over five years.

In the second round, another 11 schemes were cleared by the Cabinet in November 2020, with a total initial allocation of `1.46 trillion over a five-year period. The sectors covered were electronic/technology products, pharmaceuticals, telecom & networking products, food products, white goods, solar modules, automobiles & auto components, advance chemistry cell battery, textiles, specialty steel and drones. However, the sector-wise allocation was later tweaked, based on re-assessed priorities, which generated some savings. For instance, the outlay for the auto sector was reduced to `25,938 crore from `57,042 crore. For technical and man-made fibre-based textiles, the revised outlay stood at `6,013 crore, against `10,683 crore earlier; it created scope for another PLI scheme for this labour-intensive sector.

“The government continues to believe the PLI schemes will be a ‘game changer’ because it has potential to boost manufacturing, economic growth and job prospects. On top of that, since the schemes are not demand-side stimulus measures, chances of them stoking price pressure, when inflation is already elevated, are muted,” said a source.

Also Read|Credit ratings without lenders’ info cannot be used by banks for capital computation: RBI

PLI schemes are crucial to the country’s ambition to expand the share of manufacturing in the country’s GDP to 25%; the share has remained stagnant at 16-17% over the past three decades. Elevated manufacturing will ultimately spur exports as well and create a few global champions in each of the sectors.

The schemes will be launched at a time when India’s economic growth faces strong external headwinds, mainly the Ukraine war and global growth slowdown. Several agencies have now scaled down their FY23 forecasts for the country. Most recently, the World Bank slashed its growth forecast for India to just 6.5% for FY23 from 7.5% earlier, as it presented the gloomiest projection among independent agencies. Some analysts are projecting a further deceleration in growth in FY24—Nomura pegs it at just 5.7%. Against this backdrop, the PLI schemes may turn out to be a key growth lever.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

First published on: 11-10-2022 at 06:10:00 am