Tuesday's Talking Points
PLI – Hits, Misses and Way Forward!
What’s the Point? (A Brief Summary)
Recently, the Government, under its PLI (Production-Linked Incentive) Scheme, has announced an incentive re-allocation of ₹18,000 crore to 6 new sectors, which include chemicals, shipping containers, and inputs for vaccines. Despite the re-allocation, these new sectors are expected to add to the Government’s intention to boost manufacturing, and vision of an Atmanirbhar Bharat. PLI has resulted in capacity building in some sectors, and this push towards new industries bodes well for the growth in manufacturing and exports in India.
How has the PLI Scheme been shaping up?
To get a snapshot of the PLI Schemes and how it has been shaping up, let us have a look at the table* below:
Sector | Time period | Financial Outlay, USD bn | Potential / Committed Investment, USD bn# | Incremental Revenue, USD bn# | Employment (Direct + Indirect), mn# |
---|---|---|---|---|---|
Mobile Manufacturing | 6 years (FY21-26) | 5.6 | 1.5 | 141.9 | 0.5 |
Medical Devices | 8 years (FY21-28) | 0.5 | 0.1 | -- | -- |
Key Starting Material / Bulk Drugs | 9 years (FY21-29) | 1 | 0.7 | -- | -- |
Automobile and Components | 5 years (FY23-27) | 3.6 | 5.7 | 31.1 | 0.8 |
ACC Battery | 5 years (FY22-26) | 2.5 | 6.1 | 29.7 | 0.0 |
Pharmaceutical Drugs | 9 years (FY21-29) | 2.1 | 1.4 | 39.2 | 0.1 |
Telecom and Networking Products | 5 years (FY22-26) | 1.7 | 0.4 | 32.4 | -- |
Food Products | 6 years (FY22-27) | 1.5 | 0.8 | 16.2 | 0.2 |
Textile Products: Man-Made Fibre and Technical Textiles | 5 years (FY22-26) | 1.5 | 2.6 | 40.5 | 0.8 |
Specialty Steel | 5 years (FY22-26) | 0.9 | 5.4 | 27.0 | 0.5 |
White Goods (ACs and LED) | 5 years (FY22-26) | 0.9 | 1.1 | 23.0 | 0.4 |
Electronic / Technology Products (IT Hardware) | 4 years (FY22-25) | 1.0 | 0.3 | 44.6 | 0.2 |
High Efficiency Solar Panel Modules | 5 years (FY22-26) | 0.6 | 2.4 | 47.3 | 0.2 |
Drones and Drone Components | 3 years (FY22-24) | 0.02 | 0.6 | -- | 0.0 |
Semiconductor Production | 6 years (FY23-28) | 10.4 | 31.1 | 62.2 | 0.1 |
IT Hardware 2.0 | 6 years (FY24-29) | 2.1 | 0.3 | 40.9 | 0.1 |
Total | 35.9 | 60.5 | 576.0 | 3.8 |
Impact of PLI positive despite a muted start
In June 2023, a review of the PLI Scheme was done by Ministry of Commerce and Industry (MCI). As per the review, since the disbursements have followed a lag, only ₹2,900 crore of the total allocation of ₹1.97 lakh crore was disbursed by the end of FY2023 in 8 sectors - Large-Scale Electronics Manufacturing, IT Hardware, Bulk Drugs, Medical Devices, Pharmaceuticals, Telecom and Networking Products, Food Processing and Drones and Drone Components.
While these statistics may not sound encouraging, as per MCI, PLI has helped in creating a significant impact since its launch in 2020, in the form of the following:
- An increase of 76% in Foreign Direct Investment in the manufacturing sector in FY2022 (USD 21.34 billion) compared to previous FY2021 (USD 12.09 billion)
- An application count of 733 approved in 14 sectors with expected investment of ₹3.65 lakh crore
- 176 Micro, Small and Medium Enterprises (MSMEs) among PLI beneficiaries in sectors such as Bulk Drugs, Medical Devices, Pharma, Telecom, White Goods, Food Processing, Textiles and Drones
- An actual investment of ₹62,500 crore realized till March 2023, which has resulted in incremental production / sales over ₹6.75 lakh crore, employment generation of around 3.25 lakh, and a ₹2.56 lakh crore boost in exports till FY23
Understanding PLI through a Case Study of Manufacturing of Smartphones
The chart below illustrates how different components of the value chain can lead to varying degrees of value addition when manufacturing a smartphone.

Source: PricewaterhouseCoopers (PwC) Report (“Our Take” – July 2023) **IP: Intellectual Property
While certain research papers have claimed that the value addition in the manufacturing of smartphones in India has been restricted to mere assembling of the components, that is not completely true.
India started at the bottom of the value chain with the assembly of smartphones, and has expanded its presence to manufacturing of casing and sub-components of a smartphone. This increased presence has led India’s value addition in manufacturing of smartphones to grow from just 2% in 2015 to about 15% in 2022. Further, the PLI Scheme is increasing the localisation of manufacturing, with major smartphone companies shifting their bases to India. With suppliers of major smartphone companies like Foxconn, Wistron and Pegatron, increasingly manufacturing high-end phones in India, value addition in manufacturing of smartphones in India has nearly touched 20%***.
Just like smartphones, India is in the initial phase of expansion in multiple sectors. But with many more phases to come, Indian Economy is expected to grow subsequently. With PLI Scheme, it is expected that there will be increase in production, employment generation, and economic growth, placing India competitively on the domestic and global stage.
Sources: Press Information Bureau, *UBS Securities, #Estimates for the next 5 years PwC, ***Secretary of the Department for Promotion of Industry and Internal Trade (DPIIT), and other publicly available information
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