Budget Watch: From toys to footwear, new PLI schemes knocking on the door

Amid demands from industry bodies and govt departments, the upcoming Union Budget 2024 may see PLI schemes introduced for even more items

The upcoming Union Budget is likely to introduce production-linked incentive (PLI) schemes for additional categories such as toys, footwear, textiles, and millet-based foods, responding to demands from the industry and several government departments.

Currently, PLI schemes are in effect for 14 sectors, including mobiles, drones, telecom, textiles, automobiles, white goods, and pharmaceuticals.

New schemes, particularly in labour-intensive sectors, are expected to enhance domestic manufacturing, reduce import dependence, and increase employment opportunities.

In the Interim Budget in February, the Department for Promotion of Industry and Internal Trade (DPIIT) proposed an allocation of Rs 3,489 crore for a PLI scheme on toys and Rs 2,600 crore for leather and footwear. However, funding was provisioned only for financial year 25, pending approval from the Union Cabinet. "An entity benefiting from any other PLI scheme of the Government of India will not be eligible for the same product," stated the Interim Budget document.

Over the past year, various government departments have advocated for more PLI schemes. However, some officials have previously suggested that new schemes should be introduced only after evaluating the effectiveness of current ones.

During pre-Budget discussions with Finance Minister Nirmala Sitharaman, industry groups called for the introduction of new schemes. The PHD Chamber of Commerce and Industry highlighted the need for more schemes in labour-intensive sectors such as leather, gems and jewellery, medicinal plants, and handicrafts.

The Confederation of Indian Industry (CII) recommended an employment-linked incentive scheme for sectors with high growth potential and significant labour requirements, including toys, textiles and apparel, tourism, logistics, and small retail.

Allocation
 

The forthcoming scheme, once announced and initiated, will not require additional fund approvals, as the Centre had already earmarked Rs 1.97 trillion for the 14 PLI schemes three years ago.

However, of the allocated Rs 1.97 trillion, about Rs 41,000 crore remains unspent. This unutilised amount could be redirected to other government departments in need of funds for the PLI scheme, a flexibility built into the scheme's design.

The unspent funds result from undersubscription, tepid responses to certain schemes, such as those for textiles, bulk drugs, and white goods, and reductions in scheme allocations.