Govt plans over $2 billion in incentives for new manufacturing sectors

India is planning to offer incentives of up to 180 billion rupees ($2.2 billion) to spur local manufacturing in six new sectors including chemicals, shipping containers and inputs for vaccines, two government officials said.

The proposal is part of the country's 1.97-trillion-rupee production-linked incentive scheme (PLI), launched in 2020 which currently targets 14 sectors ranging from electronic products to drones, but has been successful only in a handful of them.

A fraction of the PLI incentives has been claimed so far, prompting the government to allocate unused funds to new sectors.

Limited payouts under the scheme could lead to "large" savings which may be redirected to new sectors, the two government officials with knowledge of the plan said.

They did not wish to be named as details of the plan have not been made public. India's federal trade ministry that oversees the scheme's implementation did not immediately respond to an emailed request for comment.

The six new sectors that could join the PLI scheme also include toys, bicycles, leather and footwear, the officials said. These sectors will share the 180-billion-rupee allocation that is being carved out from the scheme's original outlay, they added.

India sees the PLI scheme as crucial to boosting the broader Indian economy which has been starved of private investment for nearly a decade and is struggling to create adequate jobs, particularly in manufacturing.

Total incentives worth nearly 29 billion rupees were paid out in the fiscal year that ended in March. Little has been paid to businesses in sectors including speciality steel products, solar modules, and car components, according to a government report seen by Reuters.

In the fiscal year that started in April, the disbursements could rise to nearly 110 billion rupees and to 400 billion rupees by fiscal year 2024/25, one of the two officials said, citing an internal analysis by the government.

"The disbursements should be better than this estimate after some tweaks to the scheme," the official said, adding such tweaks would help speed up payouts and some sectors may get an additional year or two under the scheme.