In major boost to Indian industry, Cabinet clears Rs 2 lakh crore PLI scheme

Financial incentives announced for companies that boost production in ten sectors

Budget 2019: ACMA pitches for uniform GST rate on all auto components Representative image | AFP

Giving a leg up to Indian industry on the eve of Diwali, the Modi government today announced a production-linked incentive scheme (PLI) for ten sectors worth about Rs 2 lakh crore.

The decision was taken at the union cabinet meeting, which followed a meeting of the Cabinet Committee on Economic Affairs (CCEA), both on Wednesday. 

Subsequent to the first tranche of stimulus measures following prime minister Modi’s goal of ‘Atmanirbhar Bharat’ announced back in May, this decision will have a far-reaching impact on India’s manufacturing sector. PLI has originally been in place for mobile as well as medical devices manufacturing earlier. But, today’s govt decision expands this to further, manufacturing-oriented sectors where India is largely dependent on imports. 

The sectors selected for PLI include advanced chemistry including cell battery technology (Rs 18,000 crore), electronics and technology products (Rs 5,000 crore ), automobile and auto components (Rs 57,000 crore), pharmaceuticals and drugs (Rs 15,000 crore), telecom and network equipments (Rs 12,000 crore), textiles (Rs 10,000 crore), food products (Rs 10,000 crore), solar photovoltaic cells (Rs 4,500 crore), ACs and LEDs (Rs 6,200 crore) and speciality steel (Rs 6,300 crore).

The amounts listed would be given as a performance bonus to eligible companies that ramp up their production over the coming five years. 

“At a time like this, this is going to give the right impetus to the economy,” finance minister Nirmala Sitharaman said after the cabinet meeting. “This will ensure that critical sunrise sectors will get the necessary support from the government.”

I&B minister Prakash Javadekar pointed out how India’s manufacturing sector contributes just 16 per cent to the nation’s GDP, and how it needs to be ramped up to make India a manufacturing hub. “The idea is to develop India to become a manufacturing hub, not just for the domestic consumption, but for a global market,” he said, adding how more manufacturing will increase national output, exports and also job opportunities.

The concerned ministries and departments will immediately start implementing it, finance minister Nirmala Sitharaman said. An empowered finance committee will go through and approve proposals for each sectors, she added. Sitharaman also clarified that there is no cap on the number of companies eligible for the scheme. 

Initiated by NITI Aayog, the Finance ministry worked closely with ministries including MeITy, Heavy Industries, Telecom, Food Processing, DPIIT and Pharmaceuticals to chalk out the contours of this proposal. The sectors have been selected keeping in mind India’s utter dependence on imports in those areas, as can be seen from the inclusion of solar battery making, telecom network equipment, pharmaceuticals, white goods and speciality steel.

It’s no coincidence that the auto industry gets the lion’s share of the allotment—as much as one-fourth of the total—as the government believes turning India into an auto hub over the next five years would be just the calling card it needs to make the country an investment magnet.

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