The production-linked incentive (PLI) scheme unveiled by the Modi government to boost local manufacturing will potentially add $520 billion to the gross domestic product in the next five years, according to report by Sharekhan by BNP Paribas,one of India’s leading brokerage houses.
In November this year, Modi government approved the PLI scheme to boost domestic manufacturing and lower the country's dependence on imports, mainly from China, by incentivising and inviting global as well as capital-rich companies to set up manufacturing capacities in the count.
The scheme is applicable for 10 select sectors, which are labour-intensive and expected to cater to the growing employment needs and achieving size and scale in manufacturing. As part of the scheme, the government has made a budgetary outlay of ₹2 lakh crore.
The 10 sectors that will be get the incentives include
Advance Chemistry Cell (ACC) battery( Rs 18,100 crore)
electronics and technology products (Rs 5,000 crore);
automobiles and auto components (Rs 57,042 crore);
pharmaceuticals and drugs (Rs 15,000 crore);
telecom and networking products (Rs 12,195 crore);
textiles products (Rs 10,683 crore);
food products (Rs 10,900 crore);
high efficiency solar PV modules (Rs 4,500 crore);
white goods (Rs 6,238 crore)
speciality steel (Rs 6,322 crore)
The scheme envisages providing on average 5 per cent of the production value as an incentive. This implies that minimum production as a result of the scheme stands to be around $520 billion over the next five years, says the report.
"The PLI scheme may add around $520 billion to the GDP in the next five years," domestic brokerage Sharekhan by PNB Paribas said in a note.
The idea is to create a few large manufacturing players with the advantage of policy support to the tune of 5-8% of value add, scale and world-class technology.
According to analysts, electronics, particularly mobile phone manufacturers, stand to be the biggest beneficiary of the scheme. Other sectors that will benefit include automobile, battery, pharma, food, textiles and telecom.
If taken off as planned, the scheme could boost exports, thus narrowing the trade deficit by $55 billion.
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