How India is Revitalising Manufacturing through PLI Schemes
Kotak Insights | Date 02/11/2024
India's manufacturing sector has been stagnant for 20 years, stuck at around 15-17% of GDP and with limited job creation. Challenges like low-tech adoption and heavy reliance on imports have held it back.
But now, things are shifting.
The Production Linked Incentive (PLI) schemes are giving manufacturing a much-needed push. These incentives are bringing in big investments, increasing exports, and boosting local production in critical sectors like electronics and pharma.
Curious about the impact?
Let’s dive in to see why PLI is a game-changer for India’s future
What’s the Deal with PLI Schemes?
These schemes were introduced in phases starting in 2020, with one major goal: to level up India’s domestic manufacturing capabilities. With a total outlay of ₹1.97 trillion, the PLI schemes cover 14 critical sectors, from electronics and pharmaceuticals to drones and speciality steel.
The big idea? To get India making more, importing less, and exporting a whole lot more. And it's working. By June 2024, the PLI schemes had attracted investments worth ₹1.32 trillion. Plus, manufacturing output has skyrocketed, hitting ₹10.9 trillion.
How Is India Benefiting?
1. Electronics: From Importer to Exporter India has transformed from a mobile phone importer to a major producer. In 2023-24, 33 crore mobile units were produced, compared to 5.8 crore in 2014-15. The country is now exporting nearly 5 crore units, and FDI has surged by 254%, turning India into a mobile manufacturing hub.
2. Pharma: From Importing to Making Penicillin G India is now the third-largest pharmaceutical manufacturer by volume, with exports making up 50% of production. The PLI Schemes have reduced reliance on imported raw materials, leading to local production of key drugs like Penicillin G and advanced medical devices like MRI machines.
3. Telecom: 4G, 5G, and Beyond India’s telecom sector is another winner. India produces 4G and 5G equipment, with 60% import substitution%20and%20customer%20premises%20equipment). Global tech giants are setting up manufacturing hubs, and India is now exporting telecom gear.
4. Drones: The Startup Boom The PLI Scheme has turned India’s fledgling drone sector into a serious player. The turnover has jumped seven-fold, powered almost entirely by MSMEs and startups. India is now making drones and drone components at scale.
How PLI Is a Game-Changer for Businesses
The financial incentives of the PLI Scheme are significantly boosting Indian companies, leading to increased profits and a transformative impact on their operations. The scheme is giving companies the financial muscle they need to grow.
These incentives empower businesses to scale up their production and expand operations, which pushes companies to enhance their manufacturing capabilities.
The Apple Effect
Here’s a real-world example: Apple. The tech giant has been one of the biggest beneficiaries of the PLI Scheme, moving a chunk of its iPhone production to India.
And it's not just Apple. Other major players are joining Apple, establishing India as a vital link in global supply chains. The PLI Scheme helps mitigate manufacturing costs, positioning India as a prime destination.
Why PLI Matters for India’s Future
The PLI schemes are transforming India’s role in global manufacturing, positioning the country as a key manufacturing hub amidst shifting global supply chains, especially post-COVID and amid geopolitical tensions.
India is stepping in as a viable alternative to China, aligning with its vision for Atmanirbhar Bharat and the long-term goal of Viksit Bharat 2047, in which India aims to emerge as a developed nation.
Wrapping Up
As India celebrates the 10th anniversary of its ‘Make in India’ campaign, the PLI Schemes are proving to be a turning point. The country’s exports are shifting from traditional goods to high-value products like electronics, medical devices, and telecom equipment.
So, what's next? With more sectors being added to the PLI schemes and the government's increased focus on boosting production, India's manufacturing revolution is just getting started. What do you think, dear reader? Do share your thoughts in the comments section below.
Happy learning!
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Sources and References:
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