{"id":241211,"date":"2023-05-06T20:25:51","date_gmt":"2023-05-06T14:55:51","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=241211"},"modified":"2023-05-06T20:25:51","modified_gmt":"2023-05-06T14:55:51","slug":"what-critics-of-the-govt-miss-not-much-is-lost-if-the-pli-scheme-fails","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/what-critics-of-the-govt-miss-not-much-is-lost-if-the-pli-scheme-fails\/","title":{"rendered":"What critics of the govt miss: Not much is lost if the PLI scheme fails"},"content":{"rendered":"\n

Source<\/strong>: The post is based on the article\u00a0\u201cWhat critics of the govt miss: Not much is lost if the PLI scheme fails<\/strong>\u201d published in<\/strong> Business Standard <\/strong>on\u00a06th<\/sup> May 2023<\/strong>.<\/p>\n

Syllabus: GS 3 \u2013 Growth and Development<\/strong><\/p>\n

Relevance: <\/strong>issues with Production-linked Incentive (PLI) scheme and regional free trade arrangements.<\/p>\n

News<\/strong>: The government is often criticized for staying away from regional free trade arrangements and for the introduction of a Production Linked Incentive Scheme (PLI)<\/strong><\/a> for the manufacturing sector.<\/p>\n

What are the reasons behind these criticisms?<\/strong><\/h2>\n

It is argued that staying away from regional free trade agreements will make India stay away from regional production and supply chain<\/strong> and PLI would make an uncompetitive manufacturing sector.<\/strong><\/p>\n

The manufacturing sector that thrives only with the help of subsidies is not good for long term industrial growth.<\/p>\n

Furthermore, no economy has sustained rapid economic growth without a strong and growing export sector.<\/strong><\/p>\n

Therefore, India should get into those regional trade arrangements, and bring required changes to gain profit from becoming a part of international supply chains.<\/p>\n

Moreover, India\u2019s export sector has evolved with the time and critics usually miss this point.<\/p>\n

How has India\u2019s export sector evolved?<\/strong><\/h2>\n

Merchandise exports<\/strong>, which is Asia\u2019s regional trade agreements have been mostly about, are no longer the primary driver of India\u2019s export growth<\/strong>.<\/p>\n

The role has been taken over by services exports<\/strong>, which have grown more rapidly.<\/p>\n

The critics want India to follow the East Asian model of export-led growth<\/strong> that focused on low-value, low-margin, labour-intensive exports of products like garments.<\/p>\n

However, the operative conditions in India are different from those in East Asia and hard to change.<\/p>\n

Labour-intensive exports can succeed in India only in those sectors where – a)<\/strong> the labour cost is a small part of the product price such as the assembly of products and b)<\/strong> the domestic market provides an incentive for localising such as mobile phones and other electronic goods.<\/p>\n

However, the rest of manufactured goods exports is mostly capital-or knowledge-intensive such as refined petroleum products, engineering goods, etc.<\/p>\n

How are service exports beneficial for India?<\/strong><\/h2>\n

The more the services sector produces a trade surplus, the stronger the rupee will be.<\/strong> Hence, India\u2019s biggest comparative advantage lies in its educated, low-cost, white-collar workforce.<\/p>\n

Service exports accounted last year for 42 percent of total export earnings. If the similar trend continues, the figure could climb to 50 percent in a few years, and then overtake merchandise exports.<\/p>\n

Why is the criticism over PLI not a big concern?<\/strong><\/h2>\n

There is not much concern over PLI because if PLI fails, there is a little to lose. The incentives under PLI are very small in a macro-economic context.<\/strong><\/p>\n

For instance,<\/strong> the total PLI payout is to be under 2 trillion, over five years. This is one-tenth of 1 percent of expected GDP over that period, which is affordable.<\/p>\n

However, if PLI succeeds, it will result in investments of 3 trillion in the five-year period, which is just 1 percent of the current year\u2019s GDP.<\/p>\n

The success of PLI is supposed to trigger <\/strong>a hike in the share of manufacturing in overall capex, achieve substantial import substitution, boost exports, and create six million jobs.<\/p>\n

Therefore, in the case of PLI, there is much to gain and very little to lose.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source: The post is based on the article\u00a0\u201cWhat critics of the govt miss: Not much is lost if the PLI scheme fails\u201d published in Business Standard on\u00a06th May 2023. Syllabus: GS 3 \u2013 Growth and Development Relevance: issues with Production-linked Incentive (PLI) scheme and regional free trade arrangements. News: The government is often criticized for… Continue reading What critics of the govt miss: Not much is lost if the PLI scheme fails<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[10503,216],"class_list":["post-241211","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-business-standard","tag-gs-paper-3","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/241211","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=241211"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/241211\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=241211"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=241211"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=241211"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}