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Modi govt announces Rs 1.46 lakh crore scheme for 10 sectors, auto sector gets biggest share

The incentives, spread over 5 years, will be provided to sectors like auto, automobile components, textile products, white goods like LED screens, processed food products, among others.

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New Delhi: In an effort to boost local manufacturing and create more jobs, the Narendra Modi government Wednesday rolled out a Rs 1.46 lakh crore scheme to provide incentives linked to production in 10 sectors.

The incentives, spread over five years, will be provided to sectors like auto and automobile components, textile products, white goods like LED screens and air conditioners, processed food products, batteries, electronic and technology products, pharmaceutical drugs, including active pharmaceutical ingredients, telecom products, solar modules and speciality steel.

The proposal received the Cabinet’s nod Wednesday, and aims to boost domestic manufacturing and ramp up India’s exports, while at the same time reduce India’s dependence on imports. 

The production-linked incentive (PLI) scheme will provide monetary incentives to firms manufacturing in India over a five-year period. These could include both Indian and foreign firms.

Finance Minister Nirmala Sitharaman in a press briefing said the scheme will attract more investments into these sectors and promote job creation. It will also link the country to global value chains and build a self-reliant India, she added. 

The support to these “sunrise sectors” is part of the Modi government’s push for an ‘Atmanirbhar Bharat’ or self-reliant India. 

The government has already announced the scheme for mobile manufacturing, pharmaceutical industries and manufacturing of medical devices earlier this year amounting to Rs 51,000 crore.

All put together, the total production-linked schemes announced by the government this year were slightly less than Rs 2 lakh crore. 

With the Indian economy headed towards a sharp contraction in 2020-21, the government has been looking for ways to encourage investments in the manufacturing and infrastructure space. 

In 2019-20, manufacturing only had a 17 per cent share in India’s GDP.

Last week, Prime Minister Modi had attended a virtual meet of the world’s 20 largest pension funds, encouraging them to invest in India’s ambitious national infrastructure pipeline. 

Also read: India’s manufacturing PMI surges to a decade high in October

Auto components to get the largest pie

According to a press statement issued by the government on the production-linked incentive scheme, the approved financial outlay over a 5-year period will be highest for auto and auto components at Rs 57,042 crore, followed by Advance Chemistry Cell Battery at Rs 18,100 crore, Rs 15,000 crore for pharmaceutical drug-makers and Rs 12,195 crore for telecom products. 

While incentives for textile manufacturers amounted to Rs 10,683 crore, food products received Rs 10,900 crore. 

Industry bodies have welcomed the announcements. 

“The sectors covered under the PLI scheme are strategic, technology intensive and also important from the perspective of employment generation in the country. Indian economy offers a huge opportunity for these sectors not just from the domestic market perspective but also to make India an export hub for these products,” said Sangita Reddy, FICCI president, in a statement.

Also read: India can’t replace China at manufacturing, not without paying more: Economics commentator Martin Wolf


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