Mumbai, Feb 17 (Agency) The government’s Production Linked Incentive scheme (PLI) is expected to attract a capex of nearly Rs four trillion for the next five years, says ratings agency ICRA. Finance minister Nirmala Sitharaman in her recent Budget 2023 announced the PLI scheme covering 14 significant sectors of the economy involving a total outlay of Rs 3 trillion to boost India’s manufacturing, employment generation, import reduction and exports growth. “Manufacturing capex forms around 20-25 percent of the total capex in India currently. The PLI scheme, launched with the aim of incentivising manufacturing, is estimated to attract a capex of approximately Rs 4 trillion for the next five years,” ICRA Head of Research and Outreach Rohit Ahuja said. He noted that it has the potential to generate employment for three million, both skilled and unskilled labour, in India. “Further, there will positive implications due to reduction in net imports, as incremental revenues are expected at Rs 35-40 trillion over the next 5 years,” Ahuja added. According to ICRA, the sectors have been strategically selected by the government, considering India’s surging demand for solar, semiconductors or electronics and automobiles, among others as they are critical to develop manufacturing capabilities.
“Sectors under which PLI scheme have been announced currently constitute 40% of the total imports. The scheme, spread across 14 sectors, can enhance India’s annual manufacturing capex by 15-20 per cent from FY23,” he said. Ahuja, however, noted that the potential challenges are expected from execution delays, increasing funding costs, availability of requisite infrastructure and delays in approvals. Of the total manufacturing outlay, about 80 per cent is concentrated towards electronics, auto, solar panel manufacturing of which the focus towards semiconductors/electronics value chain is 50 per cent of outlay. “Globally, India’s manufacturing output as a percentage of GDP is comparable with developed economies like the United States, the European Union and developing economies like Russia and Brazil, however, it is way behind China. Massive opportunity emerging for India, as the world looks to diversify away from China and the PLI scheme is a step in the right direction,” Ahuja added.