The PLI scheme is beginning to make India a manufacturing powerhouse

However, the industry must remember that the PLI scheme is for five years only, and it must use these five years to make Indian manufacturing globally competitive

Never in my long career have I been so amazed to see the remarkably enabling environment being provided by policymakers to the Indian industry to enhance manufacturing value-add in the country. PLI schemes are the cornerstone of the government's efforts to make India a global manufacturing powerhouse - both by augmenting the capabilities of Indian companies and attracting global companies to set up mother plants in India. As chairperson of the Steering Committee for Advancing Local Value-Add and Exports (Scale) committee, I have an opportunity to interact with industry in many of the PLI sectors directly, and I can confidently say that PLI is making a huge difference. The impact will go way beyond the end of the scheme in five years. PLI is giving a kick-start to manufacturing in a way that it will get into a positive spiral.  

The government is investing in the long-term growth of our manufacturing sector by providing a strong financial booster shot in the Production Linked Incentive Scheme and doing other reforms. The intent is very clear - to make our manufacturing sector globally competitive and thereby make India Atamanirbhar and take advantage of the current geopolitical situation. I may also add that we are only in the second year of the 5-year PLI scheme. The positive impact of PLI will only accelerate as we move forward.

PLI Scheme, as envisioned, is built on the foundation of 14 sectors with an incentive outlay of Rs 1.97 trillion (about US$ 26 billion) to strengthen their production capabilities and help create global champions. The underlying principle is to grow scale and make India globally competitive. The expectation is that in 5 years, the industry will reach a scale and efficiency, help with other reforms such as Gati Shakti, new trade agreements, and EoDB, and that it will not need a PLI to be competitive. 

We are already witnessing a gradual shift in India's export basket from traditional commodities to high-value-added products such as electronics & telecommunication goods, processed food products etc. PLI Sectors that have seen an increase in FDI inflows in the last year are drugs and pharmaceuticals (+46 per cent), food processing industries (+26 per cent) and medical appliances (+91 per cent). 

In the 14 PLI sectors - mobiles, medical devices, telecom & networking products, automobiles and auto components, pharmaceuticals, drugs, white goods, speciality steel, electronic products, food products, textile products, solar PV modules, advanced chemistry cell battery and drones and drone components, as on date, 733 applications have been approved with an expected investment of Rs 3.65 trillion, of which Rs 62,500 cr has already been realised till March 2023. Along with the large industries, 176 MSMEs are also among the direct PLI beneficiaries. 

An incentive amount of around Rs 2,900 crore has been disbursed in FY 2022-23 under PLI Schemes for 8 Sectors, viz. large-scale electronics manufacturing (LSEM), IT hardware, bulk drugs, medical devices, pharmaceuticals, telecom & networking products, food processing and drones & drone components.

One of the big success stories is that of mobile phones. PLI has enabled major smartphone companies, e.g., Foxconn, Wistron and Pegatron, to shift their supplier base to India. As a result, top high-end phones are being manufactured in India. This has also increased localisation in IT Hardware such as batteries and laptops. India has increased the value addition in mobile manufacturing to almost 20 per cent within three years, which is indeed a very good start compared to its peers. Tech giant Apple Inc. is looking to shift part of its iPhone manufacturing value chain to India. PLI Scheme for LSEM, along with the existing Phased Manufacturing Program (PMP), has led to increased value addition in the electronics sector and smartphone manufacturing, 23 per cent and 20 per cent, respectively, from negligible in 2014-15. 

Another PLI scheme - PLI for White Goods (air conditioners, etc.) has successfully boosted local value addition. The domestic AC industry is working towards increasing the localisation content from 25 per cent to 75 per cent in 5 years and targeting to acquire a reasonable share of global export in room air conditioners from a minuscule share. There is increased confidence in Indian companies to play in the global arena, thanks to the support from PLI.  

The telecom sector has achieved import substitution of 60 per cent with increased self-reliance in antennae, GPON (Gigabit Passive Optical Network) and CPE (Customer Premises Equipment). Drones, a strategic sunrise sector, has seen significant momentum post-PLI, particularly in the growing number of promising start-ups in drone manufacturing.    

Medical devices is another important sector with high import dependency – to the tune of 75 to 80 per cent and yet high export potential. India can become the global manufacturing and export hub for medical devices. Thanks to the PLI support, the sector has received a committed investment of 1,206 cr, with an actual investment of Rs 714 cr to date. Tech giants like Wipro, GE, and Siemens are increasing their manufacturing footprint in India. It is very encouraging to see domestic manufacturing of high-end medical devices like MRI scans, CT scans, mammograms, high-end X-ray tubes, etc, starting in India.

However, the industry must remember that the PLI scheme is for five years. The industry must use these five years to create scale and reduce factor and logistics costs with the government's help. By the sixth year, we must ensure that Indian manufacturing is globally competitive, even without the help of the PLI scheme.

The writer is former MD of Mahindra & Mahindra. He is currently chairman, IN-SPACe and chairman, Scale
Disclaimer: These are the personal opinions of the writer. They do not reflect the views of www.business-standard.com or the Business Standard newspaper