Interim Budget Raises PLI Outlay to Create Jobs, Make India an Industrial Hub

The PLI scheme and Aatmanirbhar Bharat are the two primary pillars of the ‘Make in India’ programme, targeting industrial growth and job creation. In her Interim Budget for FY 2024-25, Finance Minister Nirmala Sitharaman unveiled a Rs 6,200-crore outlay for PLI, an increase of 33.8 per cent from the Rs 4,645 crore allocated in FY ’24.

The increased outlay comes barely a day after the Finance Minister had herself labelled the Budget as a “non-event”, saying concerted moves would be unveiled only in the ‘real Budget’ presentation, expected in July this year after the General Elections and the formation of the new Government. “The policy approach will remain the same—to create an environment conducive for investments, develop a modern and efficient infrastructure and open up new sectors of the economy to foreign capital”, the minister said.

The Government’s increased allocation for PLI schemes mirrors the target achievements by the beneficiary companies, which mopped up investments of Rs 1.03 lakh crore by November 2023, as per Review Reports submitted by them. According to figures released by the Ministry of Commerce and Industry, disbursals amount to around Rs 4,415 crore, with both investments and disbursals predicted to show a marked increase once the newly-inducted industry sectors move out of the gestation period and begin operating at full potential.

In what Finance Ministry insiders call ‘PLI 2.0’, the scheme, with an initial capital outlay of US $27 billion (Rs 2.24 lakh crore), will target to place India as the new ‘Factory for the World’. Topping the agenda are plans to rope in global manufacturing companies and incentivize them to shift base to India, especially after the success witnessed in the mobile devices sector (which has seen a value addition of over 20 per cent in the last three years) and a massive 90-per cent increase in the exports of electronics goods to the United States in FY’ 22-23.

While on electronics manufacturing, the Government’s increase in the PLI scheme on this front has been around 50 per cent. In November last year, Minister for Electronics and Information Ashwini Vaishnaw announced that out of 40 applicant companies, 27 (including global majors such as HP, Lenovo, Dell and Foxconn) had joined the PLI scheme for IT and hardware manufacturing. The approved companies made up-front commitments to make personal computers, laptops, servers, tablets and other equipment worth Rs 4.65 lakh crore in India.

The indigenization of telecom equipment has also increased to 60 per cent, spurring the Government to look at other emerging sectors to further diversify the scheme. In last year’s Budget, a significant expansion of industry sectors covered by the scheme was expected but did not happen. The Finance Ministry is said to be looking at luring deep-tech sectors to manufacture in India, especially since their R&D spends are around 2 per cent of revenues, compared to a much-smaller 0.7 per cent by Indian companies. Further broad-basing the PLI canvas, the Government hopes to provide an impetus to API manufacturing in India, which would be a fillip for the chemical industry.

A glaring omission from the PLI announcement is the extension of the concessional tax regime for new manufacturing, which ends on 31 March 2024. To boost domestic manufacturing, the Government had offered a 15-per cent corporate tax rate to units that commenced operations by 31 March 2024, a date that had been expanded by a full year in Union Budget 2023-24. Therefore, though a first step has been taken with the higher budgetary allocation this year, a large part of the industry’s wish-list has gone unfulfilled.

In the lead-up to the Interim Budget, the Indian industry had asked for the inclusion of more sectors and the manufacture of complex equipment within the country itself, paving the path for India to emerge as the ‘manufacturing hub of the world’. The Confederation of Indian Industry (CII) had suggested the expansion of the scheme to labour-intensive sectors such as apparel, toys and footwear. The PHD Chamber of Commerce and Industry (PHDCCI) had sought the inclusion of medicinal plants and handicrafts.

Fox Mandal & Associates, in turn, had asked that the indigenous manufacturing of batteries be included in the scheme, including recycling and hence sustainability. With the Indian automobile sector moving heavily towards electric vehicles, this could have provided a fillip to ancillary firms as well. Companies like Tata Power have already put a lot of the requisite infrastructure in place. Deloitte India had suggested that labour-intensive sectors like leather goods, garments, handicrafts and jewellery be included in the PLI list to generate more jobs, helping both rural and urban livelihoods. For the time being, these suggestions remain on the back-burner.

Launched in March 2020, the PLI scheme initially targeted three industries—mobile and allied component manufacturing, electrical component manufacturing and medical devices. Since then, it has been extended to a total of 14 sectors. Next on the Government’s agenda is a plan to use this growth as a precursor to greater industrial presence and sustainability, positioning India as a manufacturing superpower. “We shall be extending the PLI scheme to sectors such as space research and launches, EV charging stations and points, the defence sector and complex telecom equipment manufacture,” the finance ministry said in a recent statement.

Clearly, in the Government’s vision, there are no limits, including the sky and beyond.

(The writer is a veteranjournalist and communicationsspecialist. Views expressed are personal.)