NEW DELHI: The Centre is working on offering productivity-linked incentives (PLI) for manufacturing sectors ranging from telecom gear and automobiles to textiles soon, to boost economic recovery and attract fresh investment to make India a manufacturing hub.
“In the offing are about 7-8 sectors where the PLI scheme would be extended,” Economic Affairs Secretary Tarun Bajaj said on Wednesday.
The government earlier announced the PLI scheme, which provides manufacturers cash support based on their production, for electronics and pharma sectors. However, the PLI scheme will run for 5-7 years.
“It is meant to attract investment into sectors where we have competitive advantages and support industry recovery, but we realise that it cannot be forever,” said officials.
“We started working on the PLI scheme as a replacement for the Merchandise Export Incentive Scheme (MEIS), but have decided to make it more broad-based to help industrial recovery as well as encourage investment,” officials added.
India’s index of industrial production had contracted 8 per cent in August, while IMF forecasts the country’s economy may contract by as much as 10.3 per cent this financial year.
Since the pandemic, global supply chains have been relocating so as to reduce a single country risk.
Apple’s main contractors including Foxconn have been shifting their bases to India and Brazil. Under the incentive scheme, a number of sectors including telecom gear, automobile and auto parts, textiles, leather and solar cells, will be covered.
Officials further said that the cost of the MEIS which is being replaced by another scheme called Remission of duties and taxes on exported products, was about Rs 41,000 crore for the current financial year.
MEIS is being scrapped from December 31, as the US had challenged it before the WTO as it is not compliant with the global body’s rules.
This amount would now be diverted towards the PLI scheme. A section of analysts, however, feel even the PLI scheme may run foul of WTO rules, as it could be seen as an embedded subsidy.