While the Production-Linked Incentive (PLI) given to chosen manufacturers in certain sectors has won many plaudits, many doubters have raised pertinent questions about the scheme. As anticipations grow that the government might extend the scheme to more sectors in the forthcoming budget, the Centre needs to consider the many ‘shortcomings’ experts have pointed out about PLI. The government has offered scheme benefits to manufacturers in 14 sectors since March 2020. Over 600 applications have been approved. Official data shows that till September 2022, investments worth Rs 41,000 crore had come under the scheme against the expected Rs 2.71 lakh crore, and around two lakh jobs have been created against the desired 60 lakh jobs.
Critics have questioned the scheme for various reasons, including allocating scarce government resources to the scheme, which may prove unviable in the long run in the absence of overarching reforms to attract investment into manufacturing sectors. Many sectors already under the PLI’s ambit may not necessarily be labour or capital-intensive. Instead of offering incentives to all sectors, the government should focus on capital-intensive and job-creating sectors. Some say it has been extended to many sectors where India already has a good track record of manufacturing, like in pharma, steel and auto components.
The government has taken some tariff measures and is likely to take more to ‘support’ manufacturing in India. Some experts have pointed out that tariff measures like high customs duty on raw materials and intermediary goods could punish those PLI sectors that depend on importing these goods to manufacture in India. Others say that India needs a more predictable and stable regulatory regime for manufacturing to grow, and more favourable trade pacts for access to newer export markets. Without an enabling environment, there is a serious question of whether some manufacturers will continue producing in India after the scheme gets over in five years. There is also the ethical question of subsidising huge corporates at the cost of a large section of society which still has no access to good healthcare, habitation and education. Extending PLI to additional sectors means weaning more resources from areas like education and healthcare. Therefore, the government might also want to listen to the critics and not go the whole hog on the PLI scheme in the budget.