Editorial Articles

volume-14,03-09 July 2021

Production Linked Incentive (Pli) Scheme and Employment


A meaningful change in India's industrial policy, the ProductionLinked Incentive (PLI) schemes are the latest additions to the game-changing reforms that have been introduced under the aegis of the 'AatmaNirbhar Bharat Abhiyan' (Self-Reliant India movement) launched by Prime Minister Narendra Modi.

 The idea behind the scheme is to offer companies incentives on incremental sales from products manufactured in India, over the base year. The scheme also invites foreign companies to set up units in India alongside encouraging local companies to set up or expand existing manufacturing units, generate more employment and cut down the country's reliance on imports. It will also have beneficial spill-over effects via the creation of a big supplier base for the anchor units established under the scheme.

In the Union Budget 2021-22, the Finance Minister announced an outlay of Rs. 1.97 lakh crore (~USD 26 Bn) for the PLI schemes for 13 key sectors which have been shortlisted on the basis of their potential for revenue and employment generation. The scheme also intends to generate large-scale employment by incentivising the development of traditional, labour-intensive sectors such as food processing and textiles.

Covering key employment generating sectors of ESDM, automobiles, pharmaceuticals, telecommunications, textiles, food products, renewable energy, white goods and steel, the scheme envisages to provide an average 5% of the production value as an incentive. This implies that the minimum production in the country as an outcome of the PLI schemes stands to be around Rs. 3.92 lakh crore (~USD 500 Bn) in the next five years, as per reports by NITI Aayog.

This massive boost in production has the potential to create nearly 1.40 crore man-months' worth of jobs directly from 2021-22, which translates to effectively doubling the existing workforce across sectors. With the inclusion of the suppliers and vendors of the manufacturing companies benefitting from the PLI scheme, a total of 4.20 crore man-months of jobs are set to be generated, as per the data by Indian Staffing Federation.

While making domestic manufacturing globally competitive, boosting exports and creating global champions across strategic sectors, the biggest takeaway of the scheme lies in its potential to generate employment. Even while defining each sector's expected outcomes, employment shares the stage with parameters like increase in investment, production and exports.

The most exemplary example of the PLI scheme's success in transforming the domestic manufacturing landscape of a specific sector can be seen in the largescale electronics manufacturing domain, where, within a few months of the scheme's launch, the 16 approved companies produced goods worth nearly Rs. 35,000 crore, invested nearly Rs. 1,300 crore and are set to create around 22,000 jobs, under the scheme.

At the outset of the PLI schemes, mobile manufacturing and specified electronic components has pegged its expected direct employment of nearly 2 lakh and an additional indirect employment of nearly 3 times the direct employment in next five years. A similar major feat has been achieved by the medical devices sector, where 14 applications have been approved by the government with a total committed investment of Rs. 873.93 crore and expected employment generation of about 4,212 out of the larger goal of creating additional employment of 33,750 jobs over a period of five year.

The success of the PLI in large-scale manufacturing sets the perfect precedent for the pharmaceutical industry to witness similar growth and expand its domestic manufacturing capacities. For starting materials/drug intermediaries and active pharmaceutical ingredients, approvals have been accorded to 16 applicants which have committed a total investment of Rs. 348.70 crore and employment generation of about 3,042 out of the proposed target of creating 12,140 overall jobs.

In November 2020, the Union Cabinet has given its approval to introduce the PLI Scheme in the 10 key sectors of Advance Chemistry Cell (ACC) Battery, Electronic/ Technology Products, Automobiles & Auto Components, Pharmaceuticals drugs, Telecom & Networking Products, Textile Products, Food Products, High Efficiency Solar PV Modules, White Goods (Air Conditioners and LED Lights) and Specialty Steel.

As per government estimates, the PLI scheme is expected to yield employment creation, starting from the next financial year—1.80 lakh employment opportunities for manufacturing electronic/ technology products, one lakh jobs for manufacturing pharmaceuticals drugs, 2.5 lakh persons for segments of food for which the PLI has been announced, four lakh direct and indirect employment opportunities for the white goods sector; and direct employment of about 30,000 and indirect employment of about 1.2 lakh persons in the entire solar PV manufacturing ecosystem.

As per the Indian Staffing Federation, 14,07,778 jobs will be created in Advance Chemistry Cell (ACC) Battery, 3,88,889 jobs in ESDM, 44,36,600 in manufacturing of automobiles and its components, 11,66,667 in production of pharmaceuticals drugs, 9,48,500 in telecom and networking products, 8,30,900 for manufacturing textile and 8,47,778 for food products, 3,50,000 in solar PV modules, 4,85,178 in white goods (specifically air conditioners and LED Lights) and 4,91,711 jobs for manufacturing specialty steel. The grand total direct and collateral job surge expected has been pegged at 1,13,54,000 and 3,40,62,000 respectively, by the Indian Staffing Federation.

The PLI scheme is expected to have a cascading effect, having a lasting impact on MSMEs (Micro, Small and Medium Enterprises). Along with the anchor units, supplier units will also help generate massive primary and secondary employment opportunities. Moreover, the specific product lines identified in each of the 10 sectors is based on having high growth potential and capabilities to generate medium- to large-scale employment.

As the detailed guidelines of each sector under PLI are being released and a roadmap for its effective implementation being drawn, the coming five years will witness a sharp yet meaningful turn in its larger industrial policy. The new progrowth template for India's industrial policy contains all essential parameters to make India a manufacturing hub and transform its huge population into productive workforce.


(The author is associated with Strategic Investment Research Unit, Invest India, e-mail ID : mishika.nayyar @investindia.org.in)


Images Courtesy: Google