Budget 2024: Watch out for textile, auto & green energy sectors as PLI scheme may get a boost

The full budget of the new government will be tabled on Tuesday, July 24 with strong expectations running across industries in forms of sops, PLI schemes, rationalization of tax structure and relaxations for corporates, GST benefits, revision in income tax slabs and more being the key demands from the Finance Minister Nirmal Sitharaman.
 

In the first full time budget of Modi 3.0, the production-linked incentive (PLI) scheme is likely to see a revamp with discussions on to include more sectors, especially those linked to employment generation in its ambit, suggest sources. The government thinks that it should be tweaked to include more labour-intensive sectors as well as those that have linkages to MSME enterprises.
 

Allocation under major PLI schemes has grown significantly in FY25. Large Scale Electronics and IT Hardware, Automobiles and auto components and Pharma have dominated most of the allocation under the PLI Scheme in the interim budget, said a report from CareEdge Ratings.
 

The total PLI incentive in FY23 stood at Rs 2,002 crore, while the revised estimates for FY24 came in at 8,007.3 crore and may increase to Rs 14,167.1 crore in FY25. "Government may look to increase allocation or include more labor-intensive sectors like textiles, leather and footwear and toys to aid job creation," it said.
 

Introduction of PLI scheme for cotton-based apparel and garment manufacturing and can be expanded to railway ancillary and telecom equipment. It would also help boost exports, said CareEdge. Promotion of the domestic manufacturing ecosystem for renewable energy through a mix of budgetary support, grants, tax breaks and PLIs can also be looked at, it said.
 

Continuation of existing policy framework through PLI schemes, promotion of green technology, digital push fiscal discipline along with extension of capex programs would be seen as encouraging in the current investment environment, said Brokerage firm Sharekhan.
 

"The brokerage said that the FM may provide extension of subsidy schemes for EVs and incentivize alternative fuel segments. The auto Industry is expecting an expansion of the PLI scheme along with a concrete procedure for fund disbursal for existing PLI beneficiaries. The government may broaden the scope of PLI schemes to new sectors such as chemicals, services, electronic components and sub-assemblies," it added.
 

Continuation of existing policy framework through PLI schemes, promotion of green Energy, digital push, fiscal discipline along with extension of capex programs would be seen as encouraging in the current investment environment, said  Asit C Mehta Investment Interrmediates.
 

"The textile sector expects higher fund allocation to MSMEs, which comprise 80 per cent of the textile market. There are calls to extend the PLI scheme to the garment sector and to lower import duties on cotton. The Government takes steps to correct the inverted duty structure on a number of goods by rationalising levies on several products, that are inputs for electronics, copper tubes and pipes, ferro alloys, textile staple fibres and certain chemical preparations to lift local manufacturing," it said.
 

Any encouragement to private capex recovery through the production-linked incentive or PLI scheme expansion will be a positive. The government’s coalition partners’ response post-budget and the launch of new PLI schemes to expand to new segments of manufacturing and improve private capex will be interesting to watch out, said InCred Equities.
 

The Finance Minister is expected to take steps to provide economic boost to sustain India’s growth momentum in the Union Budget, said Rajesh Sinha Senior Research Analyst at Bonanza Portfolio. "Companies such as Polycab India, Dixon Technologies and Amber Enterprises could gain from government incentives for manufacturing and electronics production," he said.
 

Investors anticipate that the Budget 2024 will provide more funding to infrastructure development, causing an earnings boost in these companies, said Diwakar Rana,Fund Manager PMS, Prudent Equity.
 

"Enhanced infrastructure boosts productivity, creates jobs, and attracts new investment in addition to boosting economic growth. Sustaining investor confidence and encouraging long-term investment in the Indian stock market depends heavily on this stability," he said.