Thursday, May 26, 2022

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India’s PLI Scheme : From Employment to Exports

There is some really good news coming for India directly from a number of sources, including the World Bank. India is all set to emerge as the fastest growing economy in the world backed by the success of the government’s Production-Linked Incentive (PLI) Scheme.

“To reflect an improving investment outlook with private investment, particularly manufacturing, benefiting from the Production-Linked Incentive (PLI) Scheme, and increases in infrastructure investment”, it has upgraded India’s growth numbers to 8.7% in FY 2022-23 and 6.8% in FY 2023-24- says the World Bank.

Another accolade for the PLI scheme has come from BNP Paribas Asset Management. This entity has made a very heartening and bold statement. According to BNP Paribas Asset Management “the success of PLI is expected to add 1.7 percent to the country’s GDP by 2027”.

It further says- “According to industry estimates, the schemes could generate $150 billion in new sales, and $70 billion of domestic value-add, or 1.7% of 2027 GDP. They could add a substantial 0.3% to annual GDP growth between 2023 and 2027. The direct impact of these schemes is likely to be larger on labour (an estimated 2.8 million new jobs) than on capital spending (estimated at $28 billion). There is likely to be significant upstream activity as a result, driving further gains in jobs and spending.”

Thirdly, according to the Indian staffing federation, PLI in the manufacturing sector will create an additional 1.40 crore man-month of jobs directly. With the inclusion of suppliers and vendors, a total of 4.20 crore man-man months of jobs are set to be generated by the PLI scheme.

The PLI Scheme was launched by the government amidst the COVID-19 Pandemic to reinforce the manufacturing sector in the country.

The Scheme involves incentives of Rs. 1.97 lakh crore over a period of five years and covers 13 sectors such as telecom, electronics, auto parts, advanced batteries, pharmaceutical drugs, and solar energy components. It was also in tune with the government’s Aatmanirbhar Bharat campaign, as it is expected that the PLI Scheme will improve local manufacturing. Simultaneously, it is expected to boost India’s export sector.

Last year, PM Modi expressed confidence that the PLI Scheme is likely to increase production levels in the country by $520 billion over the next five years.

The scheme is now helping India to emerge as the world’s leading production powerhouse.

In its report, the World Bank said that investments in India should benefit from the resumption of contact-intensive services and ongoing fiscal and monetary support, amidst a near gloomy report for a large section of the global economy.

Further, besides changing the global manufacturing outlook, the PLI is also helping the domestic employment scenario. It has helped the Indian economic policy to strike a balance between rising GDP and employment rate.

Let’s see how the PLI scheme is all set to change the job-market scenario in the country.

In fact, it is a trinity of policies in tandem. It is expected that with the emphasis on Aatmanirbhar Bharat, Make-In-India and PLI scheme, employment generation is going to reach great heights in the upcoming decade.

Recently, the government approved the PLI scheme for the drone and automobile sectors. The incentive provided by the government to the drone sector is Rs. 120 crores. Now, the Rs. 120 crore incentive to the drone sector is expected to attract more than Rs. 35,000 crores. These investments will help in creating more than 10,000 jobs alone in drone manufacturing. Besides direct drone manufacturing, the drone equipment and other feeder services to drone manufacturing are expected to further create 5 lakh new jobs in the upcoming three years.

Similarly, the incentive provided by the government to the auto sector is nearly Rs. 26,000 crores. These incentives will help domestic as well as foreign investors to expand their manufacturing capacity inside the country. Along with the expansion, it will help in creating lakhs of jobs in the economy.

The Rs. 26,000 crore approved for the auto sector mainly focuses on electrical vehicle segments.

The move from petrol, diesel to electric vehicles alone will create additional 1 lakh jobs in next year.

Thirdly, from an employment point of view, Rs. 6,238 crore incentive is provided to the white goods sector.

This alone will create four lakh direct and indirect jobs, in addition to the already existing ones.

The PLI scheme is expected to bring in incremental investment of Rs. 7,920 crores, incremental production worth Rs 1,68,000 crores, exports worth Rs. 64,400 crores, and earn direct and indirect revenues of Rs. 49,300 crore. Proposals worth nearly Rs. 6,000 crores are already with the government.

The PLI scheme is expected to be a mega game changer in the manufacturing sector, as the incentives provided under it are double the workforce in upcoming years.

On 8th September, 2021, the government extended the ambit of the Production Linked Incentive scheme and the Textiles sector. Again, in the employment domain, the Rs. 10,683 crore incentives provided to the textile sector is estimated to lead to more than 7.50 lakhs additional jobs created in the sector. In the textiles sector the target of exports worth 44 billion dollars is seemingly in sight.

The Rs. 15,000 crore incentive given to pharmaceuticals is set to generate 20,000 direct and more than 80,000 indirect jobs.

Rs. 40,000 crore incentive under the PLI scheme for smartphones, Apple alone has created 20,000 jobs in last 7 months.

Two Apple contract manufacturers have hired 7,500 workers each after August 2020, when the smartphone PLI became operational. The second tier of the vendors supplying inputs to these two companies has also hired approximately 5,000 additional workforce. Resultantly, the export of mobile phones from India have grown by a massive 250 per cent year-on-year in the April-June quarter of FY22.

In the first five months of the financial year, Indian exports have touched the $163.67 billion mark which is nearly 67 per cent higher than the same period last year and 22.9 percent higher than 2019. However, the government is planning to achieve the ambitious target of exports worth $400 billion this year. With 7 months to go, the target looks well attainable.

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