Miheer Karandikar
Industrial policy has made a comeback recently, and India is no exception. The Production-Linked Incentive (PLI) scheme is India’s most significant yet, spanning 14 sectors with an outlay of Rs 1.97 lakh crore. The PLI scheme incentivises companies to manufacture in the country by giving them subsidies based on the value of the goods they manufacture. However, their success has been mixed, to say the least. A recent report in the Indian Express sought the jobs generated by these schemes. Only four sectors have achieved their targets, two have achieved half, and the other seven are nowhere close. So what’s the problem? Production-linked incentives alone do not and cannot solve the issues that all these sectors have.
Questioning the Sector Selection
Under the PLI schemes, the government provides money upfront for companies to invest in land, labour, capital, etc, to set up manufacturing facilities in the country. The reasoning can be that the production cost in the country is high, so the government subsidises some of the cost to allow companies to be competitive. The cost of production can be high for various reasons, including costly inputs (land, labour, capital), costly compliance, etc. These reasons can apply to any sector. Then why were these 13 ones chosen in the first place?