Sandip Sabarwal says PLIs give money to inefficient companies, bats for tax reduction

Sandip Sabharwal

While Indian government is looking to tweak and expand production-linked incentives (PLI) scheme to various sectors, Sandip Sabharwal, Ex-Head of Equity SBI MF, took a contrarian view, saying that PLIs are inefficient way of using taxpayer's money as it rewards inefficient companies.

“However its just putting money in the pockets of inefficient corporates from taxpayer money. Moreover it removes level playing field by making entry of new players difficult who can never compete with the PLI players. Better to reduce overall taxes or GST to promote growth”, Sabharwal wrote in his X account (formerly known as Twitter) on November 2.

Most analysts are excited about #PLI schemes
However its just putting money in the pockets of inefficient corporates from taxpayer money
Moreover it removes level playing field by making entry of new players difficult who can never compete with the PLI players

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Better to reduce…

— sandip sabharwal (@sandipsabharwal) November 2, 2023

His tweet sparked a debate as some of the X users said that PLI schemes help, while the others agreed with Sabharwal. A user wrote, “India is so late and uncompetitive in manufacturing race on a global field than it needs to jumpstart the process through incentives”.

While another said: “A valid perspective! While PLI schemes can boost certain sectors, they raise concerns about efficiency &  fair competition. Lowering overall taxes /revisiting GST indeed be an alternative approach to promote broad based economic growth, encouraging innovation, entrepreneurship”. Another user commented that “the objective of PLI scheme is to make local leaders global giants, ‘inefficient cos' first have to fulfil committed investments and then have to achieve committed sales.”

Indian government launched the PLI scheme in 2021 to promote manufacturing in 14 sectors including large-scale electronic manufacturing, white goods, textiles, manufacturing of medical devices, automobiles, specialty steel, food products, high-efficiency solar PV modules, advanced chemistry cell battery, drones and pharmaceuticals with an outlay of Rs 1.97 lakh crore.