India Proposes Incentives Worth More Than Rs 18,000 Crore for Emerging Manufacturing Sectors

21 Sep, 2023

India Proposes Incentives Worth More Than Rs 18,000 Crore for Emerging Manufacturing Sectors

India is set to provide substantial incentives amounting to Rs 18,000 crore (equivalent to $2.2 billion) to invigorate domestic manufacturing in six emerging sectors, including chemicals, shipping containers, and vaccine inputs. This strategic move is an integral part of India's ambitious production-linked incentive scheme (PLI), initiated in 2020. While the PLI scheme originally encompassed 14 sectors, spanning from electronic products to drones, its success has been relatively limited, with only a handful of sectors thriving.

As of now, only a fraction of the incentives outlined in the PLI scheme has been claimed. Consequently, the government is contemplating reallocating the unutilized funds to new sectors. This decision has been driven by the anticipation of substantial savings due to the limited disbursements under the existing scheme. Government insiders, privy to these plans, have suggested that these funds could be channeled into promising sectors, although they prefer to remain anonymous since the details of this proposal have not been publicly disclosed. The Federal Trade Ministry in India, responsible for overseeing the implementation of the PLI scheme, has not yet responded to requests for comment on this development.

The six sectors earmarked for potential inclusion in the PLI scheme encompass toys, bicycles, leather, and footwear, in addition to the aforementioned sectors. These industries are poised to share the Rs 18,000 crore allocation, a sum that will be diverted from the scheme's original budgetary allocation.

India regards the PLI scheme as instrumental in bolstering the broader Indian economy, which has grappled with a paucity of private investment for nearly a decade. Furthermore, the country has been striving to generate an adequate number of jobs, particularly within the manufacturing sector.

To date, the total incentives disbursed amount to approximately Rs 2,900 crore during the fiscal year ending in March. Notably, certain sectors, such as specialty steel products, solar modules, and car components, have received minimal disbursements, as indicated in a government report obtained by Reuters.

In the ongoing fiscal year, commencing in April, there are expectations of a substantial increase in disbursements, potentially reaching nearly 110 billion rupees. Additionally, the government's internal analysis suggests that by the fiscal year 2024/25, disbursements could surge to Rs 40,000 crore. One of the officials involved in the decision-making process believes that with certain adjustments to the scheme, disbursements could surpass these estimates, facilitating faster payouts. It's also possible that some sectors may receive an extension of one or two additional years under the PLI scheme, further enhancing its effectiveness.