Interim Budget 2024: Can expansion of PLI scheme boost the economy further? Here's what experts said

Budget expectations: The Interim Budget, which will be tabled on Thursday, February 1, is expected to be non-event as mentioned by Finance Minister Nirmala Sitharaman earlier. But the industry players are still hoping that the Centre may make some announcements on the PLI front. The production-linked incentive scheme or PLI scheme was launched in March 2020 and initially targeted three industries -- mobile and allied component manufacturing, electrical component manufacturing, and medical devices. Later it was extended to 14 sectors. 

The Commerce and Industry Ministry reported that the production-linked incentive (PLI) schemes for 14 sectors have received investments worth more than Rs 95,000 crore until September of the previous year. Additionally, a total of 746 applications have been granted approval for these schemes until November 2023. Since its success, the government stated that it would extend the PLI scheme to more sectors to multiply its benefits.

Earlier this week, Telecom secretary Neeraj Mittal said the government is looking to bring an improved and better telecom production-linked incentive (PLI) scheme and is open for suggestions from the micro, small and medium enterprises (MSMEs). “The new scheme which will be a better scheme, (for that) we look forward to suggestions from the MSME industry to see where we can improve,” Mittal said at the Bharat Telecom 2024 event organised by the Telecom Equipment and Services Export Promotion Council (TEPC).

Here's what the industry players and experts from the Interim Budget:

1. Industry body Confederation of Indian Industry (CII) has in its key proposals for Vote on Account/ Budget 2024-25 suggested that the PLI scheme be expanded to labour-intensive sectors such as apparel, toys and footwear for boosting employment generation.

2. The PHD Chamber of Commerce and Industry (PHDCCI) has in its pre-Budget submission to FM Sitharaman suggested that the PLI scheme be expanded to medicinal plants and handicrafts.

3. "The expectations underscore the ‘Make in India’ Initiative and emphasizes on increased R&D investments and expanding indigenous manufacturing of batteries. The PLI Scheme will incentivise and support startups in fostering innovation. The government has to introduce relaxations and incentives for affordability and innovation in sustainable mobility in India.  Extending the PLI Scheme to battery recycling will also ensure that instead of exporting dead batteries, domestic recycling will help India become the hub of sustainability," said Gaurav Sahay, Practice Head (Technology & General Corporate), Fox Mandal & Associates for your kind consideration.

4. "Today we have 14 sectors under the PLI scheme, but a lot of these sectors do not generate massive employment. Leather, garment, handicraft, jewellery -- many of these sectors need to be covered under the PLI scheme because they are the largest generators of jobs. This would help rural as well as urban households," said Rajat Wahi, Partner, Deloitte India.

5. "In alignment with the government's focus on Production-Linked Incentive (PLI) schemes, we anticipate continued encouragement for the electronics sector. Additionally, third-party manufacturers should receive incentives and benefits through Production Linked Incentives (PLI). Enhancements to existing schemes or the introduction of new ones specific to display technologies can significantly boost local manufacturing and make India a global hub for monitor production. To foster innovation and R&D in the electronics industry, we look forward to policies that incentivize technology advancements, product design, and sustainable practices. Support in these areas will contribute to the development of cutting-edge technologies meeting the global standards" said Sanjoy Bhattacharya, Director of Sales & Marketing, IT Business, ViewSonic India.

6. “We think India’s production-linked incentives could be a useful way to shore up the viability of export-oriented businesses since they will only generate benefits if output is exported, thus paying back the government via multiplier generation,” said Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics in a report.

7. “Aligned with the Make in India initiative, we expect that the Production Linked Incentive (PLI) program, designed to support IT hardware and computer server manufacturers, along with the government's resolute commitment to digital skill development, will be accorded significant priority,” said Alok Dubey, Chief Finance Officer of Acer India.

8. "Production Linked Investment (“PLI”) Schemes have been the focus of the government since its introduction. The success of PLI in chip and electronic goods sectors has made the pave for its further expansion to other industries. In line with PLI, it is expected that the government may extend the sunset clause provided under Section 115BAB of the Income Tax Act, 1961, which provides a 15% for companies who have set up new manufacturing facilities, from current date of 31st March 2024 to alteast 31st March 2029. Considering that the manufacturing activities takes time to take off, therefore, the said expectation is not unfounded," said Amit Singhania of Areete Law Offices.

9. "The industry hopes to see an expansion of the Production Linked Incentive (PLI) scheme into more technology sectors. The PLI scheme has already bolstered manufacturing and exports in electronics, telecom, and solar equipment. Further expansion of it can provide a big impetus to domestic technology manufacturing and reduce dependence on imports. Other policy interventions in areas like data protection & cybersecurity could also provide an impetus. Incentives to encourage R&D spending, public-private partnerships in deep tech areas, and reforms to promote foreign investment in technology sectors are key expectations. However, balancing these demands with fiscal prudence will be key. The industry hopes the budget strikes the right chord in providing an impetus to technology adoption while exercising financial responsibility," said Sanjeev Chhabra, Managing Director & CEO, Beetel Teletech Ltd.

10. "As India prepares for the Interim Budget, I hope the government continues its push towards technology-led growth. The PLI scheme, which has catalysed domestic manufacturing and exports in sectors like electronics, automobile, and pharma, can further propel India's self-reliance and competitiveness," said  Chandrika Behl, Managing Director, Exhibition India Group.

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