Production Linked Incentive (PLI) Scheme

Production Linked Incentive (PLI) Scheme in India and its Key Sectors

PLI Scheme is a program launched by the GoI to boost domestic manufacturing and attract investments in specific sectors. Know all about Production Linked Incentive (PLI) Scheme.

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Context: The Smartphone Production-Linked Incentive (PLI) scheme, the most successful among the 14 such schemes, may be extended by a couple of years beyond its official end date of 2025-26.

Smartphone PLI Scheme Generates Revenue 19 Times The Incentives Disbursed

The Smartphone Production-Linked Incentive (PLI) Scheme has proven to be a highly successful initiative for the Indian government, generating significant returns on its investment. Over the last four fiscal years (2021–2024), the scheme has yielded 19 times the amount of revenue compared to the disbursements made as part of the incentives.

According to the India Cellular and Electronics Association (ICEA), the scheme contributed approximately $13.03 billion (₹1.1 trillion) to the government’s revenue, while the production of mobile goods under the scheme reached $148.71 billion (₹12.55 trillion). The total incentive allocation during this period was $687.3 million (₹5.8 billion), and the resulting revenue from the scheme amounted to $12.35 billion (₹1.04 trillion).

The government’s efforts have been further amplified by the increase in GST revenue, which rose by $5.69 billion (₹62,000 crore) after the tax rate on mobile phones was raised from 12% to 18% in April 2020, coinciding with the launch of the scheme.

The PLIs success has been driven by the presence of key players like Apple’s contract manufacturers (Foxconn, Pegatron, and Wistron), along with Samsung. The initiative has created nearly 300,000 direct jobs and 600,000 indirect jobs, particularly benefiting women in blue-collar, mid-skilled roles. India has now emerged as the third-largest exporter of smartphones, with exports reaching $34.01 billion (₹2.87 trillion) by the end of 2023. The value addition in smartphone manufacturing has also grown significantly, from 12% to nearly 20% in recent years.

In sum, the PLI scheme has not only helped India become a key player in global smartphone production and exports but also boosted local job creation and economic growth, making it one of the most successful government incentives in recent years.

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Production Linked Incentive (PLI) Scheme

The Product Linked Incentive (PLI) is a government initiative to boost domestic manufacturing in specific sectors by offering financial rewards to companies based on their incremental sales.

About PLI Scheme

Launched

March 2020

Objective

The PLI scheme targets enhancing India’s manufacturing capabilities and reducing dependence on imports.

The government announced the scheme across 14 key sectors.
This initiative is expected to create around 60 lakh new jobs and achieve an additional production of 30 lakh crore over the next five years.

Sectors Covered Under PLI Scheme

Initially, the scheme focused on three industries –

Mobile manufacturing and electric components,
Pharmaceuticals, and
Medical device manufacturing.

It expanded in November 2020 to include ten more sectors: Electronic/Technology Products, Pharmaceuticals, Telecom & Networking Products, Food Products, White Goods (ACs & LED), High-Efficiency Solar PV Modules, Automobiles & Auto Components, Advance Chemistry Cell (ACC) Battery, Textile Products, and Specialty Steel. Later, in September 2021, Drones and Drone Components were also added.

Incentive Structure

The PLI scheme offers financial incentives to boost domestic manufacturing of advanced technology products and attract investments in the automotive manufacturing value chain. The incentives are applicable for sales of products manufactured in India over a period of five consecutive years, starting from April 1, 2022.

Sector-Wise Implementation

Different ministries are responsible for implementing the PLI scheme in their respective sectors. For example, the Ministry of Electronics and Information Technology manages the electronics and IT hardware sector, which includes mobile phones, specified electronic components, laptops, tablets, etc.

Impact on Food Processing and Other Sectors

In the food processing sector, the PLI scheme supports the manufacture of specific food product segments and helps in branding and marketing Indian food products internationally.

Similarly, in the medical devices sector, the scheme targets a range of devices, including cancer care, radiology, imaging, and implants.
The scheme is also significant in the speciality steel sector, focusing on five categories of speciality steel products.

Related Information

Smartphones have been a major success of the government’s Production-Linked Incentive (PLI) scheme.
The scheme has helped India become the second-largest mobile phone manufacturing country, after China.
The PLI scheme has been pivotal in the China-Plus-One strategy, which aims to attract companies manufacturing in China to shift their production to India by leveraging geopolitical tensions between China and the US.

Data Related To PLI Scheme

Employment: Employment generation (direct & indirect) of over 6.78 lakh individuals.
Exports: Exports have surpassed Rs. 3.20 lakh crore.
Sector Contributions: Significant sectors include Large-Scale Electronics Manufacturing, Pharmaceuticals, Food Processing, and Telecom & Networking products.
MSME Beneficiaries: 176 MSMEs are among the beneficiaries in various sectors.
Incentive Disbursement: Around Rs. 4,415 crore was disbursed as incentives for 8 sectors.
Local Manufacturing: Local manufacturing of various electronic components.
- PLI beneficiaries have about 20% market share but contributed to approximately 82% of mobile phone exports in FY 2022-23.
Mobile Phone Production and Exports: Smartphones are now the fourth-largest export item from India with 42 per cent.
- Increase in Domestic Production:
  - Domestic production of smartphones increased to Rs 4.1 trillion in FY24.
  - This is up from Rs 2.14 trillion in FY20, the year before the scheme was announced.
- Rise in Exports:
  - Smartphone exports from India rose to Rs 1.2 trillion in FY24.
  - This is a significant increase from Rs 27,225 crore in FY20.
Foreign Direct Investment (FDI): FDI increased by ~254% since the inception of the PLI scheme for Large-Scale Electronics Manufacturing (LSEM).
Pharmaceuticals: Significant reduction in raw material imports. Manufacturing of unique intermediate materials and bulk drugs like Penicillin-G in India.
Medical Devices Production: Production of 39 medical devices has commenced.
Telecom Sector: 60% import substitution achieved. Sales increased by 370% in FY 2023-24 compared to the base year FY 2019-20.
Drone Industry: Significant impact on investment with a CAGR of 90.74%.
Food Processing: Increase in sourcing of raw materials from India.
- Sales of organic products increased.
- Indian brand visibility in the international market has been enhanced.
- Increased millet procurement from 668 MT (FY 20-21) to 3,703 MT (FY 22-23).
Atma Nirbhar Vision: PLI Schemes for 14 key sectors with an incentive outlay of Rs. 1.97 lakh crore (over US$26 billion) are under implementation.