Asia St: Why India’s Expanding PLI Schemes Matter

Asia Street

Know the Street. Know the people. Know Asia.

Welcome to BGA’s Asia Street blog, where you’ll find commentary and analysis from our people on the ground.

Why India’s Expanding PLI Schemes Matter

September 21, 2021

The BGA India Team, led by Managing Director Ratan Shrivastava, wrote an update to clients on India’s expanding Production Linked Initiative (PLI) scheme. The update examined the context for the development, its significance as well as implications for businesses.

Indian Prime Minister Narendra Modi (Photo Credit: Wikimedia Commons).

Context

India’s Union Cabinet on September 15 approved fresh production-linked incentive (PLI) schemes for the auto and drone industries. The PLI schemes for the sectors are aimed at enhancing the country’s manufacturing capabilities.

The government also announced major reforms for the telecom sector, adding to measures designed to help several sectors become more resilient, efficient and globally competitive while generating large-scale skilled and unskilled employment.

Significance

These changes bear watching given the significance of the sectors concerned. India’s automobile industry contributes 35 percent of the country’s manufacturing GDP and is the fourth largest in the world.

The PLI scheme holds significance for India’s economy and companies. The scheme is expected to overcome the cost impediments to the industry and increase support for companies to achieve scale, competitiveness and market access while building champions in the manufacturing of advanced automotive technology products in India. In addition to automobiles, the PLI in drone manufacturing is expected to offer tremendous benefits to almost all sectors of the economy including agriculture, infrastructure, emergency responses and mining.

Implications

The measures should be viewed from the broader perspective of the ongoing implications of the pandemic. India’s automobile sector had been experiencing a slump starting even before the pandemic-induced economic downturn due at least in part to reduced availability of financing and increasing costs. The telecom sector, which had been financially stressed for the past few years, has been provided much-needed relief through several structural and process reforms.

The reforms could have important consequences. The reforms are expected to generate employment opportunities, promote healthy competition and protect the interests of consumers. They are projected to infuse liquidity, encourage investment and reduce regulatory burden on telecom service providers (TSPs), thus giving a boost to the sector and encouraging investment.

BGA will continue to keep you updated on developments in India as they occur. If you have any questions or comments, please contact BGA India Managing Director Ratan Shrivastava at ratan@bowergroupasia.com.