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PLI Scheme in India - Challenges and Prospects



  Jan 31, 2024

PLI Scheme in India - Challenges and Prospects



Introduction

India’s Production-Linked Incentive (PLI) Scheme, introduced in 2020, was a strategic initiative aimed at bolstering vital industries. However, after three years, it encounters challenges, including regulatory complexities and budget limitations. This essay scrutinizes the PLI Scheme, highlighting its objectives, implementation hurdles, and the necessity for a refined approach to realize its goals.

Background

Historical Context: The urgency for an industrial policy in India was recognized post the 2006 crisis in manufacturing. The PLI Scheme, conceived as part of this broader policy framework, intended to stimulate strategic sectors.
Global Context: The 2008 economic downturn rekindled industrial policies worldwide. Nations, including the US and EU, began aggressively supporting domestic industries, despite WTO regulations against such practices.

PLI Scheme Objectives

Core Aims: The scheme’s primary objectives include nurturing global champions in manufacturing, integrating India into global supply chains, and encouraging domestic small and medium enterprises.
Atmanirbhar Bharat Nexus: Aligned with the self-reliance campaign, the PLI aims to reduce import dependency, especially from dominant suppliers like China.

Implementation Challenges

Complex Regulatory Framework: The scheme, beset with intricate eligibility criteria and investment conditions, risks reverting to the cumbersome ‘licence raj’ era. This complexity could impede efficient execution.
Inadequate Budgetary Support: Despite ambitious announcements, actual financial allocations have been modest, impacting the scheme’s progress across industries.
Sectoral Concerns: While the scheme covers a range of industries, there are inconsistencies in application and potential issues with achieving economies of scale, especially in sectors like pharmaceuticals and electronics.

Comparative Analysis

East Asian Model: Successful industrial policies in East Asia combined capital accumulation, technology mastery, and productivity growth. The PLI Scheme’s lack of focus on technological capabilities and innovation is a notable omission.
Innovation Policy Integration: Modern industrial strategies emphasize technological innovation and R&D. India’s approach needs to recalibrate to incorporate these elements effectively.

Conclusion

The PLI Scheme, pivotal for India’s manufacturing aspirations, confronts significant operational and strategic challenges. A comprehensive review and restructuring, inspired by successful global models and an emphasis on innovation, are imperative. Without these adjustments, the PLI risks becoming another unfulfilled promise in India’s industrial policy landscape.

SRIRAM’s


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