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First introduced in India in March, 2020, Production Linked Incentive (PLI) scheme initially targeted three sectors- Mobile manufacturing, Drug and active pharmaceutical ingredients and Medical devices. The PLI scheme is a non tariff measure introduced to incentivise incremental sales of products manufactured in domestic units by improving competitiveness and providing an impetus to production.

This would give India the opportunity to take on China as the global manufacturing hub by becoming an integral part of global supply chain by expanding key downstream operations and providing the necessary stimulus in high-tech production and cutting edge technology sectors. The world was looking towards India as an alternative to China in the aftermath of the huge disruptions in supply chain management due to the Covid-19 pandemic and the US-China trade war.

To cement this perception and to make this a sustainable reality, the PLI scheme provides incentives to foreign companies to set up units in India along with encouraging domestic companies to expand existing manufacturing units to global scale. These measures would facilitate import substitution and generate more employment. This would in turn give Atmanirbhar Bharat scheme the required impetus to take wings and reach hetherto unchartered skies.

An outlay of Rs. 3.47 Lakh Crores has been earmarked for the PLI scheme during the 5 years from the financial year 2021-22 across 14 key sectors- Automobiles & Auto components, Advanced chemistry cell battery, Pharmaceuticals, Telecom & Network products, Food Processing, Textiles & Apparel, Semiconductors, to name a few.

The effectiveness of the PLI scheme lies in providing benefits to manufacturing organisations based on commitments to incremental revenues over the base year, as opposed to financial aid to all entities. The scheme could well turn out to be largely a self financed one, as the additional GST collected from incremental sales could cover the incentives being paid. Another sterling feature is that the strategy of this scheme would be sector specific, issued by respective individual sector ministries and the provisions would be focussed on providing solution to typical challenges faced by each sector. For example in case of automobiles & auto components the incentives would be applicable on incremental export sales, where both significant values as well as challenges lie, rather than on domestic sales. Incentive range of PLI is from 2.25% - 10% on the incremental sales (incremental exports in case of Auto).

The eligibility criteria for disbursement of incentives for MSMEs is a minimum of Rs. 10 crs of incremental investment which is Rs. 100 crs in case of other manufacturing companies. The maximum is Rs. 1000 crs. These new investments in private sectors shall create jobs across the country in the field of Electrical & C & I erection, testing etc through small contractors. 

The idea is to increase India’s total industrial production by over US $ 520 billion during the implementation of the scheme. But to achieve this goal there has to be a multi-pronged strategy aimed at reduction of compliance burden, upgradation of ease of doing business, designing of collaborative infrastructure, looking towards newer ways of operational efficiencies.

An integrated approach considering the above mentioned factors is essential for the PLI scheme to not only succeed in reaching the targets but enabling sustainable and far reaching effects having global resonance and jobs creation through many small contractor. Manpower supply agencies or small contractors will find enough business opportunity.