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Modi Government Extends Production Linked Scheme to 10 Sectors, Gives Big Boost to Manufacturing in India

Production Linked Incentive scheme

Union Cabinet led by PM Modi today announced yet another major scheme to boost manufacturing sector in India.

In a major move to boost India’s manufacturing capability and to enhance exports, Production Linked Incentive (PLI) scheme has been extended to 10 more sectors such as auto components and automobile sectors, pharmaceuticals, food processing etc.

This is in addition to the PLI Schemes which have already been announced for manufacturing of Mobile Manufacturing, Medical Devices and Active Pharmaceuticals in India.

What is Production Linked Incentive Scheme?

Production linked scheme are schemes wherein cash incentives will be given to companies setting up manufacturing in India based on the output produced by them.

PLI schemes help India to become more attractive for manufacturing particularly in areas involving cutting edge technology.

Production Linked Incentive Scheme Extended to 10 Sector

Under this scheme, any company setting up manufacturing in these 10 sectors will get incentives upto Rs 1.46 Lakh crores over the next 5 years.

The 10 sectors along with financial incentives allotted to them are mentioned below:

Sectors Incentive Approved
Automobiles & Auto Components 57,042 Crore
Advance Chemistry (ACC) Battery) 18,100 Crore
Pharmaceuticals drugs 15,000  Crore
Telecom & Networking Products 12,195  Crore
Food Products 10,900  Crore
Textile Products: MMF segment and technical textiles 10,683  Crore
Speciality Steel 6,322  Crore
White Goods (ACs & LED) 6,238  Crore
Electronic/Technology Products 5,000  Crore
High Efficiency Solar PV Modules 4,500  Crore

The PLI scheme across these 10 key specific sectors will make Indian manufacturers globally competitive, attract investment in the areas of core competency and cutting-edge technology; ensure efficiencies; create economies of scale; enhance exports and make India an integral part of the global supply chain.

10 more Champions Sectors selected for PLI Scheme

Industry doyen and President of CII, Uday Kotak welcomed the PLI scheme calling it transformational, timely and strategically targeted policy that will help India to become global manufacturing hub.

The Cabinet release also specified the reasons behind the selection of these 10 sectors:

The automotive industry is a major economic contributor in India. The PLI scheme will make the Indian automotive Industry more competitive and will enhance globalization of the Indian automotive sector. Auto components and automobile sector has been allotted the maximum incentive of Rs 57,042 Crore.

PLI scheme has been extended to production of electronic products as India is expected to have a $1 trillion digital economy by 2025. Additionally, the Government’s push for data localization, Internet of Things market in India, projects such as Smart City and Digital India are expected to increase the demand for electronic products.

ACC battery manufacturing represents one of the largest economic opportunities of the 21st century for several global growth sectors, such as consumer electronics, electric vehicles, and renewable energy. The PLI scheme for ACC battery with incentive upto Rs 18,100 Crore will spur large domestic and international players in establishing a competitive ACC battery set-up in the country.

To incentivise the global and domestic players to engage in high value production of pharmaceuticals in India, PLI scheme has been extended to manufacturing of Pharmaceuticals with incentive upto Rs 15,000 Crore. Indian pharmaceutical industry is already the third largest in the world by volume and 14th largest in terms of value. India possesses the complete ecosystem for development and manufacturing of pharmaceuticals and will further develop a robust ecosystem of allied industries in Pharma sector.

Telecom equipment forms a critical and strategic element of building a secured telecom infrastructure and India aspires to become a major original equipment manufacturer of telecom and networking products. With incentives upto Rs 12, 195 crores, telecom equipment manufacturing both for self-consumption and exports will get big boost.

The Indian textile industry is one of the largest in the world and has a share of almost 5% of global exports in textiles and apparel. Now PLI scheme will also aim to improve India’s share in the manmade fibre (MMF) segment in line with global consumption pattern offering incentives upto Rs 10, 683 Crore.

Large imports of solar PV panels pose risks in supply-chain resilience and have strategic security challenges considering the electronic (hackable) nature of the value chain. A focused PLI scheme for solar PV modules will incentivize domestic and global players to build large-scale solar PV capacity in India and help India leapfrog in capturing the global value chains for solar PV manufacturing

White goods such as air conditioners and LEDs have very high potential of domestic value addition and making these products globally competitive. A PLI scheme for the sector will lead to more domestic manufacturing, generation of jobs and increased exports.

Steel is a strategically important industry and India is the world’s second largest steel producer in the world. It is a net exporter of finished steel and has the potential to become a champion in certain grades of steel. A PLI scheme in Specialty Steel will help in enhancing manufacturing capabilities for value added steel leading to increase in total exports.

Big Bonanza for Farmers Too

3 historic laws passed by Modi government to liberate the farm sector in India from shackles of Middlemen and enable farmers to sell anywhere profitably has already been hailed as 1991 moment for farm sector.

Now another Diwali Bonanza has been delivered to farmers with announcement of Rs 10,900 crore PLI scheme in food processing sector.

The growth of the processed food industry leads to better price for farmers and reduces high levels of wastage. Specific product lines having high growth potential and capabilities to generate medium- to large-scale employment have been identified for providing support through PLI scheme.

Along with earlier PLI schemes announced, Modi Government has announced incentives upto Rs 2 lakh crores for spurring manufacturing in India via production linked incentives routes. This scheme along with recent reforms in labour and agriculture laws and relaxation in FDI limits will catapult India to achieve PM Modi’s clarion call for AatmaNirbhar Bharat and $5 Trillion economy by 2025.