PLI Shot Update: Full Budget 2024-25 Is An Opportunity To Unveil A Policy Booster Dose

Soon after its launch in March 2020, the scheme became a favourite of India Inc, and its ambit increased from an initial three to 14 sectors. But industry wants more.

To iron out the contours of Budget 2024-25, the FM has held consultations with economists, experts, and business tycoons over the last week. Indian industry  too has shared its wishlist from the PLI perspective. It says it wants to generate more jobs by expanding the scheme to furniture, toys, footwear, and more segments of textiles, along with a stronger focus on MSMEs.

As India awaits its first Budget from a the first genuinely coalition Government in over a decade, two pillars of the erstwhile BJP-led majority regime remain in sharp focus - the PLI scheme and Aatmanirbhar Bharat, both of them intrinsic to the ‘Make in India’ program targeting industrial growth and job creation.

The Money To Drive In PLI Investments

February’s Interim Budget for FY 2025 saw the unveiling of a Rs 6,200-crore PLI outlay, an increase of 33.8 per cent from Rs 4,645 crore in FY 2024. The industry’s fresh ‘demand’ could mean ramping the outlay to over Rs 8,000 crore, another hefty rise.

That takes us to the nitty-gritty of the PLI scheme, conceived to provide a fillip to domestic manufacturing and employment, riding on the back of import substitution. The targeted segments in Phase I were technology-oriented – mobile and allied components, electrical components, and medical devices.

Sectors added subsequently were pharmaceuticals, drugs, specialty steel, telecom, electronic products, white goods, food products, textile products, solar modules, advanced chemistry cell batteries, and drones. Indian industry wants this list to be revisited and expanded, mainly because as it offers financial rewards, as a percentage of revenue over five years.

However ‘hurdles’ imposed by the World Trade Organisation (WTO) prevent India from linking PLI to value-addition, especially in complex products such as chips. The world at large does not want another China sized factory to the world emerging and WTO rules are supposed to ensure that.

Nevertheless,  India’s merchandise exports have increased quietly since the PLI scheme was launched, growing by 9.21 per cent in April-May this year.

It is this quiet rise that can be exploited by the new coalition Government as it goes about implementing its strategic 125-day policy blitzkrieg to get Indian business up and running again. It would indeed be a poker re-steal if announcements on PLI and other fronts are progressive and globally ‘industry-threatening’. Nothing succeeds as definitively as success in the face of indeterminate odds.

PLI Bonanza For Corporate India

The numbers do some crisp talking on past performance. Companies that benefited from previous chapters of the PLI scheme mopped up investments of Rs 1.03 lakh crore (by November 2023), according to Review Reports.

Subsequently, the Ministry of Commerce and Industry announced Government PLI incentive disbursals of Rs 4,415 crore. Both investments and disbursals showed a marked rise when targeted industry sectors matured and began operating at full potential.

In her speech during the announcement of the Interim Budget in February, the FM herself labeled the activity as a “non-event”, saying the “real moves will be unveiled in the real Budget”.

Sitharaman, who will this time surpass Morarji Desai’s record in terms of number of Union Budgets presented, added: “The policy approach will remain unchanged – to create an environment conducive for investments, develop efficient infrastructure and open up new sectors of the economy.” The FM’s time to come good on that statement has arrived.

A key task for the FM is to scour out the tenure of extension of the scheme for all targeted sectors. This was missing from the announcements made during the Interim Budget, which offered the promised incentive of 15-per cent corporate tax only to units that commenced operations by 31 March 2024.

In the Budget announcement in 2023, a year’s extension to this date had been announced. Similar augmentation this time around would assuage Corporate India’s concerns, particularly to sectors yet to receive this olive branch.

The call for expansion of the PLI scheme to labour-intensive sectors such as MSMEs is a no-brainer, for they collectively bore two deathly blows in the form of demonetisation and the slowdown in the West, which was a result of the Covid-19 lockdowns.

Resurrecting these industry segments is paramount and would create millions of jobs, in turn boosting earnings and providing an uptick in consumption, something that is sorely needed by many sectors of the Indian economy.

Manufacturing Shift From West To East

India would also do to learn from the rest of the world, with even advanced nations falling prey to the new world order of cheaper manufacturing and increased imports. For instance, much of the US and Europe saw a near-catastrophic manufacturing shift to China, Taiwan, and Vietnam. India is witnessing such a shift too, with global firms investing in production facilities, such as Taiwan’s Innolux (LCDs) and Wistron (iPhone assembler), and US-based Micron (chips).

Today, India is gaining from the chinks in China’s once un-dentable manufacturing visage. It is time to capitalize further on the shifting global dynamics stoking the ‘China Plus One’ strategy. As China fights a trade war with the US and battles supply chain disruption, India is perfectly placed to push industrilasation by using the PLI card with renewed gusto.

Expectedly, the Government and FM are concerned that doling out too much in terms of sops could make Indian industry over-dependant on incentives and freebies. But there’s little place for fear in an economy that is rearing to pull off a Houdini-style resurgence. Remember, fears are like bubbles; a tiny prick of the policy needle will see them vanish in a jiffy.

(The writer is a New Delhi-based journalist and communications specialist. Views expressed are personal)