India’s Production-Linked Incentive Scheme

Ina Rodrigues

5 min read

India’s  Production Linked Incentive (PLI) scheme, introduced by the government, has emerged as a powerful catalyst for economic growth, drawing substantial investments and fostering development across crucial sectors. With cumulative investments reaching Rs 1.07 lakh crore by December 2023, this article explores the profound impact of the PLI scheme, analyzing its contributions to economic output, employment generation, and global market penetration.

Investments and Economic Output

The DPIIT’s recent report unveils the remarkable success of India’s Production-Linked Incentive (PLI) scheme, showcasing a substantial cumulative investment of Rs 1.07 lakh crore. This financial infusion has propelled an extraordinary production and sales value, reaching Rs 8.70 lakh crore, affirming the scheme’s transformative impact.

More than a financial boon, the PLI scheme has become a catalyst, encouraging businesses to expand operations, elevate production capabilities, and make noteworthy contributions to India’s GDP. The impressive figures underline the scheme’s role in fostering economic growth.

As businesses thrive under PLI, it creates a domino effect, generating employment opportunities, strengthening sectoral contributions, and catapulting Indian goods onto the global stage with exports surpassing Rs 3.40 lakh crore.

The scheme’s success is further evident in the disbursement of incentives, totaling Rs 4,415 crore across eight sectors, emphasizing the government’s commitment to sustained industrial growth and development.

Employment Generation

The Production-Linked Incentive (PLI) scheme has emerged as a commendable force in generating substantial employment opportunities, both directly and indirectly. As per the DPIIT’s report, around 7 lakh jobs have been created, representing a noteworthy milestone in fulfilling the imperative need for job creation in India.

This employment surge is not just a numerical achievement; it signifies the transformation of sectors benefiting from the PLI scheme into dynamic employment hubs. The scheme’s impact on job creation is multifaceted, with direct employment opportunities arising within the industries that receive incentives. Simultaneously, the ripple effect stimulates indirect job creation across related sectors and supporting industries, creating a robust ecosystem of employment.

This employment-centric approach ensures a diverse workforce’s livelihoods, contributing significantly to the broader goal of fostering economic growth and social well-being.

1. Direct Employment in Incentivized Industries:

   • The PLI scheme directly generates jobs within industries that receive incentives, such as electronics, pharmaceuticals, and food processing.
   • Incentivized companies hiring skilled and semi-skilled workers for manufacturing, production, and related activities contribute to direct employment.

2. Manufacturing and Production Jobs:

   • Direct jobs include roles in manufacturing units, assembly lines, and production facilities, ranging from machine operators to technicians and engineers.

3. Research and Development Positions:

   • The scheme’s focus on enhancing competitiveness encourages companies to invest in research and development, leading to the creation of jobs in innovation and technology.

4. Administrative and Support Roles:

   • Companies expanding operations under PLI may require additional administrative staff, creating jobs in areas such as management, finance, and human resources.

5. Supply Chain and Logistics Employment:

   • Direct jobs extend to supply chain and logistics sectors, involving roles in transportation, warehousing, and distribution to meet increased production demands.

6. Indirect Employment in Supporting Industries:

   • The ripple effect of increased production stimulates job creation in supporting industries, such as packaging, raw material supply, and component manufacturing.

7. Service Sector Opportunities:

   • The scheme’s impact extends to indirect jobs in the service sector, including roles in maintenance, repair, and customer support associated with the incentivized industries.

8. Economic Growth-Driven Jobs:

   • Indirect employment opportunities arise from the economic growth stimulated by the PLI scheme, fostering demand for various services and creating jobs in retail, hospitality, and more.

9. Skill Development and Training Roles:

   • The need for a skilled workforce prompts the creation of jobs in skill development and training programs, preparing individuals for roles in the incentivized sectors.

10. Entrepreneurial Opportunities:

    • The supportive environment created by the PLI scheme encourages entrepreneurship, leading to indirect job creation as new businesses emerge to cater to growing market demands.

Exports and Sectoral Contributions

The Production-Linked Incentive (PLI) scheme has not just fortified the domestic market but has also catapulted Indian products onto the global stage. The impressive figure of over Rs 3.40 lakh crore in exports from goods produced under PLI signifies a burgeoning global demand for products spanning key sectors like electronics, pharmaceuticals, and food processing.

This robust performance in international trade underscores the competitive advantage gained by Indian industries through PLI incentives. The scheme’s focus on incentivizing production has not only amplified the economic contributions within the country but has also positioned Indian goods as sought-after commodities in the global market.

This success in exports reflects positively on the efficacy of the PLI scheme in enhancing the competitiveness and market presence of Indian industries, contributing to the nation’s economic growth and global recognition.

 Sector-wise Breakdown

1. Large-Scale Electronics Manufacturing (LSEM):

   • The electronics sector, propelled by the PLI scheme, has significantly contributed to domestic sales and exports, aligning with the ‘Make in India’ initiative.
   • Substantial investments have resulted in the production of high-quality electronic goods, enhancing India’s self-sufficiency in electronics manufacturing.
   • The sector’s growth under PLI has positioned India as a competitive player in the global electronics market, fostering technological advancements and innovation.
   • Incentives have driven industry players to expand operations, creating a robust ecosystem for electronics production.

2. Pharmaceuticals:

   • The pharmaceutical sector has utilized the PLI scheme to fortify its global presence, making noteworthy contributions to exports.
   • Incentives have spurred the manufacturing of pharmaceutical products meeting stringent international standards, enhancing the industry’s competitiveness.
   • Growth under the PLI has contributed to the reduction of imports in the pharma sector, promoting self-reliance and a robust supply chain.
   • The scheme has played a vital role in the production of critical medicines and medical supplies, addressing healthcare needs on a global scale.

3. Food Processing:

   • The food processing industry, integral to India’s economy, has experienced significant growth under the PLI scheme.
   • Investments have driven the production of processed food products, positively impacting both domestic consumption and exports.
   • The scheme has led to increased sourcing of raw materials domestically, benefiting Indian farmers and MSMEs.
   • Enhanced visibility of Indian food products in international markets through branding and marketing has contributed to increased exports.

4. IT Hardware:

   • The IT hardware sector has witnessed positive impacts under the PLI scheme, driving investments and growth.
   • Incentives have encouraged the localization of manufacturing for various IT components, reducing dependence on imports.
   • The production-linked incentives have resulted in the creation of employment opportunities and the establishment of a competitive IT hardware ecosystem.
   • India’s IT hardware sector has become more self-reliant, contributing to the government’s ‘Make in India’ vision and bolstering the country’s technological capabilities.

5. Bulk Drugs:

   • The PLI scheme has been instrumental in promoting the manufacturing of bulk drugs domestically.
   • Incentives have led to import substitution, reducing dependency on external sources for critical pharmaceutical ingredients.
   • Increased production of bulk drugs has contributed to cost-effectiveness and self-sufficiency in the pharmaceutical sector.
   • The scheme has driven investments in research and development, fostering innovation in bulk drug manufacturing.

6. Medical Devices:

   • The PLI scheme has facilitated the production of a diverse range of medical devices in India.
   • Import substitution has been achieved, reducing reliance on foreign markets for essential medical equipment.
   • Investments in the medical devices sector have led to advancements in technology and product innovation.
   • Enhanced domestic production has contributed to meeting the rising demand for medical devices, ensuring a stable supply chain.

7. Telecom & Networking Products:

   • The PLI scheme has resulted in a significant reduction in imports in the telecom sector.
   • Sales of telecom and networking products by PLI beneficiaries have witnessed substantial growth, promoting self-reliance.
   • Investments in the sector have driven technological advancements and the adoption of cutting-edge solutions.
   • The scheme has encouraged the localization of manufacturing, fostering a robust telecom and networking ecosystem in the country.

8. Drones & Drone Components:

   • The PLI scheme has catalyzed growth in the drone industry, driving investments and technological advancements.
   • Incentives have resulted in increased domestic manufacturing of drone components, reducing reliance on imports.
   • The scheme has contributed to a surge in drone-related innovations and product development.
   • Increased investment in the sector has led to the establishment of a competitive and self-sufficient drone ecosystem in India.
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Incentive Disbursement and Future Outlook

1. Incentive Disbursement by DPIIT:
   • The Department of Promotion of Industry and Internal Trade (DPIIT) has revealed a significant incentive disbursement of around Rs 4,415 crore.
   • This disbursement spans eight key sectors that have actively participated in the Production-Linked Incentive (PLI) schemes.
2. Government’s Commitment to Economic Development:
   • The incentive disbursement reflects the government’s commitment to rewarding businesses actively contributing to economic development.
   • By disbursing incentives, the government aims to encourage industries to enhance their production capabilities, thereby fostering overall economic growth.
3. Emphasis on Employment Generation:
   • The DPIIT’s incentive disbursement aligns with the goal of generating employment, both directly and indirectly, by encouraging industries to expand and flourish.
   • Employment generation is a crucial aspect of the PLI schemes, contributing to the socio-economic development of the country.
4. Increased Allocation in Union Budget 2025:
   • Buoyed by the success of the PLI schemes, the Union Budget for the fiscal year 2025 has witnessed a notable increase in the allocation for PLI.
   • The government has earmarked Rs 6,200 crore, signifying a sustained commitment to fostering industrial growth and incentivizing key sectors.
5. Long-Term Focus on Industrial Growth:
   • The increased allocation indicates the government’s long-term focus on industrial growth through initiatives like PLI.
   • By allocating substantial funds, the government aims to create an environment conducive to innovation, efficiency, and competitiveness across various sectors.
6. Strategic Allocation for Key Sectors:
   • The budgetary allocation is strategically distributed across sectors that have demonstrated active participation and positive outcomes under the PLI schemes.
   • This targeted approach ensures that industries with growth potential and significant economic impact receive the necessary financial support.
7. Facilitating Investments and Development:
   • The government’s commitment to higher PLI allocations signals its intent to facilitate more significant investments and promote development in key sectors.
   • This approach is instrumental in creating a self-reliant industrial ecosystem, aligning with the ‘Atmanirbhar Bharat’ vision.
8. Supporting India’s Economic Trajectory:
   • The increased budgetary allocation for PLI reflects the government’s belief in the schemes’ transformative impact on India’s economic trajectory.
   • It underscores a proactive approach to supporting businesses, fostering innovation, and positioning India as a competitive player in the global market.

Ministerial Perspective and Stakeholder Engagement

Minister of Commerce & Industry, Piyush Goyal, emphasized the need for industry champions to intensify efforts in enhancing competitiveness within their sectors. He stressed the importance of creating a business environment that encourages innovation, efficiency, and adaptability.

Minister Goyal also highlighted the significance of producing high-quality goods, aligning with the broader objective of the PLI scheme to benefit both businesses and consumers.

The Production-Linked Incentive scheme has undeniably transformed India’s industrial landscape, driving substantial investments, impressive production and sales figures, employment generation, and robust export performance. As the government continues to allocate resources and incentivize industries, the PLI scheme stands as a testament to India’s commitment to fostering economic growth, global competitiveness, and job creation. Its ongoing impact and future developments will play a pivotal role in shaping India’s economic trajectory.