After FM Sitharaman, DPIIT secretary defends PLI incentives, subsidies for chip makers

Secretary, Department for Promotion of Industry and Internal Trade (DPIIT) Rajesh Kumar Singh

Amid a raging debate on the effectiveness of subsidies offered by India under the government's flagship Production-Linked Incentive (PLI) scheme, especially for semiconductors, industry secretary Rajesh Kumar Singh defended the move. He said critics are losing sight of the fact that the aim is to ensure strategic autonomy and reduce dependence on insecure supply chains.

Speaking at the Confederation of Indian Industry (CII) Annual Business Summit on May 18, Singh said the government's flagship PLI scheme sometimes faces criticism because every critic has a different perspective on what success means.

"Some say mobiles are doing well but where is the domestic value addition, ignoring the fact that domestic value addition takes time. If you see the kind of employment PLI has delivered is tremendous, especially the kind of jobs created for women workers in Tamil Nadu is amazing," Singh added.

The secretary's comments comes amid former Reserve Bank of India (RBI) Governor Raghuram Rajan's views shared back in April that India's policy to spend more on subsidies for chip manufacturing than the annual budget for the country's higher education is misguided.

Rajan clarified his comments saying that he did not mean India should not focus on the production of chips, "but with every nation trying to pursue the same, it would be a ruinous race to get into now".

Defending India's subsidies for chipmakers, DPIIT secretary Singh said, "In semiconductors, when we made large investments, and private sector came forward and one of our industrial corridor towns Dholera is where one of these large chip plants is coming then the discussion is that it is not labour-intensive enough, it is too capital-intensive and is not suitable for India. Losing sight of the fact that there the target is not labour-intensity or employment, the target is really strategic autonomy and ensuring we do not become over dependent on insecure supply chains."

India's focus on manufacturing

Just a day ago, in what seemed to be a veiled response to Rajan's take as well, Finance Minister Nirmala Sitharaman also emphasised on the need to focus on increasing India's share of manufacturing in global value chains with the help of appropriate policies.

Back in February 2024, the cabinet approved the establishment of three semiconductor units under the programme termed Development of Semiconductors and Display Manufacturing Ecosystems in India. This programme was notified on December 2021 with a total outlay of Rs 76,000 crore.

On May 18, Singh further said that countries around the world that would lecture India regarding tariffs and subsidies being distortionary are now also in the tariffs and subsidies game with vigour.

Outlining the numbers under the PLI scheme, he said, "So far we have created almost Rs 1.13 lakh crore of investment, over Rs 9 lakh crore in sales, over Rs 8 lakh in employment and exports of around Rs 3.5 lakh crore particularly through the contribution of sectors like electronics, pharma, food processing, telecom, and other products."