Exclusive | Upcoming Economic Survey may bat for more PLI schemes

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The Economic Survey 2021-22 may bat for the introduction of more production-linked incentive (PLI) schemes to encourage industry to invest in expanding domestic manufacturing capacities, sources said. They added that the emphasis would be on more specialised subcategories within the 14 sectors for which PLI schemes were announced in the last two years.

The Centre has thrown its weight behind these schemes, with a total outlay of $26 billion (Rs 1.97 lakh crore). The schemes are aimed at ensuring efficiencies, creating economies of scale, enhancing exports and providing a conducive manufacturing ecosystem, all of which are expected to make India an integral part of the global supply chain.

Ever since the first scheme was notified on April 1, 2020, for the large-scale production of electronic/technology products with a special focus on mobile phones, the government has progressively increased the list of sectors covered. Currently, they include drug intermediaries, medical devices, automobiles, and auto components, white goods like air conditioners and LEDs, solar panels, textiles and food products, among others.

“The government feels that in all of these sectors, there are other products and value chains in which India needs to build up core competency. As a result, more targeted PLIs are needed,” a senior department for promotion of industry and internal trade (DPIIT) official said. He added that the department has drawn up a list of such products and handed it over to the Finance Ministry.

While the figures for total investment proposals received so far are not available, DPIIT secretary Anurag Jain recently told reporters that it had exceeded the $26 billion outlay announced by the government for all PLI schemes.

The individual line ministries are responsible for drawing up the operational guidelines, inviting bids and selecting companies that are eligible for incentives under the PLI scheme. The incentives are to be paid out over a period of five years on achieving predefined milestones.

The scheme has already begun to have an impact. Recently, the World Bank said that the PLI schemes would help India’s economy grow at 8.7 percent in the financial year 2022-23, beating emerging market peers including China.

Shining the spotlight

Officials said the Economic Survey offers a particularly opportune occasion to push the idea since it offers technical suggestions for the short term as well as macro measures in the long term.

“The survey is known to be a good way to judge the mood of the country on fiscal and monetary ideas,” the official cited above said. The survey outlines the government’s vision for diverse areas such as agriculture, industry, infrastructure, services, social development, employment and even climate change.

The survey also reviews developments in India’s fiscal, monetary management, inflation, financial intermediation, banking and external sectors over the previous financial year.

It has become famous for introducing ideas such as the Jan Dhan-Aadhaar-Mobile (JAM) trinity, universal basic income and mass export of tech products, particularly when Arvind Subramanian was the chief economic adviser. Two years ago, the survey had batted for large-scale government investment in the manufacture and export of ‘network products’ such as computers, electronic and electrical equipment, and telecommunications goods.

“This was the forerunner of the PLI schemes and suggested that mass production of these items would help reduce crucial import burden and help India beat China in the technological space. The suggestion was not well received at first by many policymakers as it was felt that further government intervention in domestic industry would be counterproductive,” a senior finance ministry official said.

A year later, the suggestion was brought in, modified as the bouquet of PLI schemes, he added.