In the PLI outlays for 2024-25, a significant boost is being provided to the ‘automobile and auto components’ and ‘pharmaceuticals’ sectors, outlining total annual sops of over Rs 5,600 crore.

Quite clearly, the Modi 3.0 government and Finance Minister Nirmala Sitharaman are putting the exchequer’s coffers behind these two sectors, with Rs 3,500 crore and Rs 2,143 crore being allocated for ‘automobile and auto components’ and ‘pharmaceuticals’, respectively, taking the total from just these two sectors to Rs 5,643 crore.

These are significant numbers, ones that are nearly equal to the overall PLI Scheme outlay of Rs 6,200 crore announced in the Interim Budget in February this year. That number itself was 33.8 per cent higher than FY 2023-24’s overall allocations of Rs 4,645 crore. And as Sitharaman mentioned in her address to the Lok Sabha, the intent is to “further encourage manufacturing and industrial growth, and job creation”.

After Sitharaman’s Budget speech, Prime Minister Narendra Modi commented: “This Budget will give power to every section of the society.” While that statement and its impact will be much studied and deciphered, it certainly seems to hold good for PLI outlays, if the allocations for just automobiles and pharmaceuticals are an indication of things to come in the overall PLI kitty.

In the overall healthcare segment, the government has allocated Rs 89,287 crore for developing, maintaining and improving the healthcare system in FY 2025, marginally higher from Rs 88,956 crore in FY 2024. The Finance Minister has also proposed the exemption of three cancer medications from customs duties and that should provide a larger impetus to the entire industry space. Drugs used for some rare diseases have also been granted relief.

Bumper PLI Increase for Auto Sector

As for the automobile sector, it has received what may well be the biggest bonanza of this Budget in terms of sheer increase. The PLI scheme for the automobile and auto components sector has been increased to Rs 3,500 crore from Rs 484 crore in the revised estimates of 2023-24, an over seven-fold increase.

That bumper prize is obviously an offshoot of sheer performance – proposed investments from the auto sector under the PLI scheme are a heady Rs 67,690 crore, as revealed in Economic Survey 2023-24 presented in Parliament on Monday. Further, as of March 2024, capital investment under the scheme has reached Rs 14,043 crore and triggered the creation of 28,884 jobs, out of a total projection of 1.48 lakh vacancies.

These quite-staggering numbers come from the 85 applicants that have been approved by the government under the PLI scheme.

One of the reasons for the concerted push being accorded to the auto sector could be the slowdown in growth of domestic production and consumption of automotive parts from FY 2020 to FY 2023, compared to the previous five years. While the first five years saw strong growth in passenger vehicles, the pandemic brought industry to a near standstill and recovery has been tough to come by.

Soon after the Budget announcement, Finance Ministry officials were also quick to scotch speculation on payout schedules, saying the Government was now accepting applications for release of incentives on a quarterly basis, compared to the earlier norm of annual payouts.

The move stems from concerns raised over previous delayed payments, as only 5 per cent of overall payments; a meagre Rs 4,415 crore; had been paid out till January this year.

The Secretariat had earlier reported that existing beneficiaries of the scheme are cautious as they continue to wait for the promised PLI incentives of previous years to be fructified. This is a tremulous situation, since companies invested a whopping Rs 1.03 lakh crore till November 2023 under the PLI umbrella, as per Government data.

Fast Track Delayed Claims

The results of their investments are good, with production figures of Rs 8.61 lakh crore being registered, along with the creation of nearly 6.8 lakh jobs. Thus, fast-tracking delayed claims under the PLI schemes would be critical to ensure that industry confidence in the scheme remains rooted and manufacturing pursuits in India receive a push.

Also, the government has been bringing in more MSMEs and smaller enterprises into the PLI ambit. This sector is cost-sensitive, being cash-flow and labour-intensive, and timely payouts would be imperative to keep them going strong.

Encouragement for recovery of private capital expenditure through PLI expansion is a positive step. The response from the government’s coalition partners post-Budget and the launch of new PLI schemes to expand manufacturing segments and improve private capex will be closely watched by both industry and analysts.

As expected, Finance Minister Sitharaman had her task cut out in stitching together the first Budget from a non-majority regime in over a decade and her seventh in a row, a record in its own rights. What would make that record more stellar would be that of the BJP-led government pulling off a deft balancing act with its coalition partners. While the two leading supporting political parties seem to have got a whiff of good times for their states and regions, a long walk still lies ahead.

It is interesting to note what Congress leader and former Finance Minister P Chidambaram said about the overall Budget, which, eerily enough, seemed to be a direct takeaway on the PLI Scheme: “She (the FM) has virtually adopted ideas underlying Congress’ proposals on employment-linked incentive scheme, apprenticeship and tax abolition.”

Whichever way one looks at the on-ground developments, though, if good things are happening, then industry wouldn’t really mind a little bit of plagiarism.