PLI scheme to spur manufacturing, may add $520 bn to GDP in 5 years: Report

The production-linked incentive (PLI) scheme launched to boost local manufacturing may add USD 520 billion to the gross domestic product in the next five years, according to a report.

The government had in March announced the PLI scheme to help 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 country.

If materialised, the move will help cut imports on one hand and boost exports on the other.

"The PLI scheme may add around USD 520 billion to the GDP in the next five years," domestic brokerage Sharekhan by PNB Paribas said in a note.

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 Rs 1.96 lakh crore or USD 26 billion.

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 USD 520 billion over the next five years, says the report.

The idea is to create a few large manufacturing players with the advantage of policy support to the tune of 5-8 per cent 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 USD 55 billion.