Reorient PLI scheme on labour-intensive sectors to create more jobs: NCAER

The study urges a reorientation of incentives toward textiles, garments and food processing to boost employment

Reorienting the production-linked incentive (PLI) schemes by focusing on labour-intensive industries instead of the current focus on capital-intensive ones could help increase job creation, according to a report released by the National Council of Applied Economic Research (NCAER).

 

The report states that increasing focus of PLIs on labour-intensive sectors such as textiles, garments, footwear, and food processing may lead to a higher job multiplier. A job multiplier indicates the number of jobs created in an economy for one job created in a particular industry as the current PLI schemes are mainly concerned with increasing the production of high value products, which require high skill and specialised labour with a lower focus on low and middle-skilled labour- intensive sectors.

 

“Over 50 per cent of the PLI budget is allocated for large-scale electronics, IT (information technology) hardware, and drone manufacturing. However, the highest number of jobs under the scheme have been created in the food processing and pharmaceutical industry. Hence, there is a mismatch between the weight of the budgetary allocation and the potential for employment creation,” the report states.

 

The report further highlights how India has been losing out to Bangladesh and Vietnam in taking over China’s falling export share in the textile market. Despite India’s large cotton base and full-fibre-to-fashion value chain, its share in world textile exports has declined since 2017 while Bangladesh and Vietnam adopted export-led industrial strategies and favourable policy for strengthening their textile sectors. 

“Much of India’s underperformance can be attributed to fragmented infrastructure, weak enforcement of labour laws, and dispersed production structure. Meanwhile, Vietnam and Bangladesh benefited from industrial clustering, targeted fiscal incentives, and trade agreements,” the report states. 

Focusing on bilateral-trade agreements, such as United Kingdom-India free-trade agreement, which eliminates tariffs on almost 99 per cent of Indian textile and apparel exports to the UK, is one of the solutions that the report proposes. 

It also says that state-level industrial strategies could help in improving India’s position as a textile exporter, citing Tamil Nadu as an example for both effective adoption of central policies along with the state’s own efforts. 

The report also criticises the Employment-Linked Incentive (ELI) scheme, stating that it does not incorporate occupational skilling or training, which could lead to the creation of merely short-term or low-quality employment.

 

“For ELI to become more than a fiscal stimulus, it must be embedded within a broader state-level ecosystem of skilling, labour regulation reform, and decentralized execution, ensuring creation is both durable and inclusive,” the report says.

 

The ELI scheme was launched on August 1, 2025 to support employment generation and social security for all sectors, with a focus on the manufacturing sector. It promised wage-linked incentives to 1.92 crore first-time employees and to additionally create employment for 2.6 crore people by incentivising employers to hire more.

 

The PLI scheme was notified and launched in 2020 by the Central government with the aim of boosting manufacturing, attracting investment, and reducing India’s import dependence for sectors like automobiles, electronics and pharmaceuticals.