Production Linked Incentive Scheme
The Production Linked Incentive Scheme is an initiative by the central government of India. It aims to provide financial incentives to foreign and domestic companies in order to boost local manufacturing in India. The scheme intends to create more employment and reduce dependency on imports.
Features of the Production Linked Incentive Scheme
The Production Linked Incentive Scheme (PLI) is a government initiative to solidify India’s position in global supply chains through its various measures. It is designed to encourage the production of goods and services in India through offering incentives on the basis of incremental sales. Both domestic and foreign companies are invited to establish new manufacturing units or expand the existing units to boost production. Through the scheme, incentives in proportion to the incremental revenue generated by the companies will be provided.
In the initial Phase, the focus was more on electronic, medical device manufacturing, and pharmaceutical sectors. Starting in November 2020, the scheme was expanded to include more sectors. The newly included sectors are:
- Automobiles and auto components
- Textiles
- Specialty steel
- Food processing
- Telecom and networking products
- Solar photovoltaic modules
- White goods (LED lights and air conditioners)
- Green energy
- Semi-conductor manufacturing
Aims and Objectives of the Production Linked Incentive Scheme
The Production Linked Incentive Scheme is a multifaceted scheme that aims to improve various aspects of production and manufacturing. The major aims and objectives of the scheme are as follows:
- Encourage Foreign Investment: Attracting foreign investment is a key objective of the Production Linked Incentive Scheme. As the scheme offers an investor-friendly environment, it is expected to draw more foreign investors to India.
- Generate Employment: A primary goal of the scheme is to create more job opportunities. When production increases, it also leads to more jobs, especially in workforce-driven sectors.
- Enhances Domestic Manufacturing: The Production Linked Incentive Scheme has incentives to produce goods in India, to rely less on imports. This aspect of the scheme helps boost domestic manufacturing.
- Strengthen Supply Chains: The scheme also provides support for strengthening the supply chain by increasing domestic production. It leads to creating self-sufficient supply chains that are less reliant on imports.
- Boosts Export Competitiveness: The Production Linked Incentive Scheme helps bring Indian products into the world market and compete with foreign products. The high-quality products are expected to achieve good market performance.
Merits and Demerits of the Production Linked Incentive Scheme
The Production Linked Incentive Scheme is an innovative scheme that has numerous advantages, as we saw in the previous segment. But the scheme also has some drawbacks that should be noted. The merits and demerits of the scheme are as follows:
Merits
- Encourages Innovation: The Production Linked Incentive Scheme promotes innovation with the incentives it provides. This attracts foreign investments and encourages multinational companies to set up business in India.
- Enhances Trade Balance: The scheme is an instrumental tool in decreasing reliance on imports. It boosts indigenous production.
- Creates Jobs: The major objective of the scheme is to create more job opportunities for Indian citizens. Through the scheme various employment opportunities will be made in major industries including textiles, electronics, and food processing.
- Supports MSMEs: The Production Linked Incentive Scheme also helps support micro, small, and medium enterprises to grow and merge into larger supply chains.
Demerits
- High Initial investment: The scheme requires the companies to make a high initial investment to qualify.
- Partial Coverage: Although the scheme covers various industries, it still doesn't cover a lot of other important sectors.
- Complicated Implementation: The scheme is also criticised for being complex in terms of ensuring compliance and monitoring for the authorities.
FAQs on Production Linked Incentive Scheme
- What is the Production Linked Incentive Scheme?
The Production Linked Incentive Scheme is a central government initiative to generating more job opportunities and increasing production.
- What are the major industries covered in the Production Linked Incentive Scheme?
The major industries covered under the scheme include electronics, pharmaceuticals, medical device manufacturing, automobiles, food processing, textiles, specialty steel, telecom, semiconductor manufacturing, etc.
- How does the scheme help create more employment?
When more companies are established in Indian soil with the backup of foreign investment, naturally, more job opportunities will be created.
- Are there incentives for promoting green energy under the scheme?
Yes, the scheme provides incentives to produce advanced energy storage solutions and solar modules to encourage renewable energy.
- What are some of the drawbacks of the scheme?
The major drawbacks are the high initial investment, limited coverage of several other important industries, and complexities regarding its implementation.
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