| Introduction: Give a brief introduction to the PLI scheme. Body: Critically evaluate its effectiveness. Conclusion: Give ways to improve the scheme. |
Recently PLI scheme was in the news regarding its performance in boosting India’s domestic manufacturing and exports. The PLI scheme was introduced by the Central Government in 2020 with the basic aim to boost domestic manufacturing and cut down import bills. The fundamental feature of the scheme is it offers incentives to companies for sales of products manufactured in domestic units. It encourages domestic companies to set up or expand their existing manufacturing units to generate jobs and increase exports.
Evaluation of PLI scheme in boosting manufacturing and exports?
- Focus Is on large companies: Critics have often argued that the PLI scheme offers protection to large-scale companies while the need is to revive the micro sector, which is where the bulk of the employment lies. The scheme focuses on mobile manufacturing as well as pharmaceutical ingredients and medical devices while ignoring labour-intensive industries.
- Incentivise target companies: Focus targeting should be the primary aim of the PLI scheme. India should focus on its priorities and develop strategies that should fulfill our commitments accordingly. The focus should be on labour-intensive companies, large export markets, and being safe from the pitfalls of the integrated global world.
- Structural problem: Critics of PLI policy have often suggested that policy addresses the supply side situation by giving freebies to the corporate which is already a resource-rich ignoring the demand side problem of the consumer who is short of cash.
- Crony capitalism: The subsidy being offered to sectors that are in the PLI scheme also depicts favourable government decisions to such sectors which is a sign of crony capitalism. Factors like living issues and employability are neglected in these decisions.
- Large import bill: Despite investments made in the PLI scheme various reports have estimated that by 2025 also India might be importing $400 billion of electronics every year. So in a globally open and integrated economy, investments will come if we focus our efforts on the promotion, facilitation, and incentivization of investment.
- Investment in R&D: There is an urgent need to address issues in infrastructure, the quality of education needs to be enhanced and the maximum focus should be on skills upgradation.
Conclusion:
The government can consider widening the scope of the scheme and include renewable energy, electric vehicles, biotechnology, and advanced technology industries. Special focus should be given to MSMEs. Government should work to promote region-specific incentives to promote industrial development in underdeveloped or backward regions. Finally, there should be active collaboration between industry, government, research institutions, and academia to foster innovation to improve the competitiveness of domestic manufacturers.
