On Issues with PLI Scheme in the Textiles Sector – Deeper reforms

Source: This post on Issues with PLI Scheme in Textile Sector has been created based on the article “Deeper reforms – PLI alone will not bring in investment” published in “Business Standard” on 14^th February 2024.

UPSC Syllabus Topic: GS Paper 3 Indian Economy – Changes in industrial policy and their effects on industrial growth.

News: The article discusses the issues with the PLI in the Textiles Sector and the underlying reasons behind them.

Background:

The government has designed several Production-Linked Incentive (PLI) schemes for a subset of sectors that the government believes are relevant for India’s development and economic security.

However, the growth of private investment in some of the sectors — including textiles, IT hardware, and specialty steel — has been slower than anticipated. PLI Scheme for Textiles Sector

What are The Issues with the PLI Scheme for Textiles Sector?

The textiles sector has a huge impact on job creation and livelihoods. However, the PLI scheme hasn’t led to a takeoff in this sector.

Over Rs. 10,000 crores has been set aside for this programme, which is focused on man-made fibre and garments. Only a small fraction of that money has been disbursed till now.

Why have Some Countries have Done Well on Textiles and Garments Exports?

1. Solid infrastructure.
2. Reliable trade policy with low tariffs on inputs.
3. An employable workforce.
4. Investor-friendly regulations.

Where Does India Stand on These Parameters?

The government has worked hard on building infrastructure and, to an extent, on easing regulations. However, the following areas still need to be addressed:

1. Trade policy has been noticeably unpredictable.
2. Workforce development has not happened as desired.
3. Lack of judicial or administrative reform that provides business with confidence that regulations will be fairly enforced.

This has led to few takers for the money on offer under the PLI Scheme.

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What Should be Done?

1) Engaging with Stakeholders: The government should engage actively with the concerns of potential investors in each of these underperforming sectors.

2) Need for Reforms: It should be realized that the problem is not the exact parameters of the PLI scheme but the lack of deeper reform in these sectors.

According to the author, there is a need for creating business-friendly conditions for labor-intensive export growth.

Question for practice:

What are the areas India needs to work on in order to do well in the textiles and garments exports?