Production-Linked Incentive (PLI) Scheme Overview

The PLI scheme, launched in April 2020, aims to enhance India's manufacturing capabilities by providing financial incentives to manufacturers. Currently, it covers 14 sectors and has attracted both original equipment manufacturers (OEMs) and contract manufacturers.

Current Achievements

• Contributed to scale in manufacturing and limited value addition in areas such as surface mounting, PCB assembly, product testing, and packaging.
• Encouraged the creation of manufacturing hubs with a focus on incremental sales.

Potential Improvements

• Expand incentives to include domestic value addition and incremental exports.
• Address the low percentage of value addition in key sectors, which remains in single digits.

Importance of Localisation

Localisation of electronics manufacturing is crucial for creating a robust domestic manufacturing ecosystem. This will enhance the competitiveness of local manufacturers by:

• Increasing their bargaining power in global supply chains.
• Encouraging relocation of component manufacturers to India.

Challenges and Proposed Solutions

India's relatively small market in telecom and electronics poses challenges due to insufficient incentives for relocating supply chains. Proposed solutions include:

• Access to export markets to drive scale and market efficiency.
• Involvement of foreign OEMs to boost domestic component manufacturing ecosystems.

Strategic Benefits

Leveraging foreign OEMs can foster a growing component manufacturing ecosystem, resulting in:

• Knowledge and productivity spillovers.
• An expanded manufacturing base across more products, similar to strategies adopted by Japan, South Korea, and China.

Job Creation and Sector Performance

The PLI scheme's impact on job creation varies across sectors:

• Positive impacts in mobile phones, food processing, and pharmaceuticals.
• Moderate results in auto, IT hardware, and specialty steel.
• Underperformance in textiles and advanced chemical cells.