Analysis of production linked incentive schemes in India

Abstract

In March 2020, the government of India launched Production Linked Incentive (PLI) Schemes for three sectors and subsequently ten more schemes were launched in November 2020. PLI schemes aim at incentivizing large scale investment in the manufacturing sector with an aim to boost the manufacturing sector, create jobs and export made in India products all around the globe. Each scheme has been tailor made to suit the demands of a very specific industry. Companies applying for the benefits under the scheme must comply with the minimum threshold investment limit and must keep up with the incremental sales requirements in order to be eligible for benefits. All the schemes aim to provide benefits to the firm for a limited period of time and the quantum of benefits is gradually brought down to help the industries transition to self-sufficiency. The success of these scheme depends a lot onthe kind of industries selected. These schemes are best suited for the industries that have large economies of scale in their operations because when the economies of scale kick in government support is not needed hence making the transition to self-sufficiency a natural process. Other countries like China, Vietnam, etc. have also experimented with similar schemes in past and have had success in boosting the domestic manufacturing industry.