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Over $2 billion in government incentives are planned for new manufacturing sectors

Sep 21, 2023

By: BlinkX Research Team

According to two government officials, India intends to provide incentives worth up to 180 billion rupees ($2.2 billion) to promote local manufacturing in six new industries, including chemicals, shipping containers, and vaccine ingredients.

The idea is a component of the nation's 1.97 trillion rupees production-linked incentive scheme (PLI), which was introduced in 2020 and targets 14 industries, from electronic items to drones, but has only been effective in a small number of them.

Since just a portion of the PLI incentives have been utilized thus far, the government has decided to transfer unused funds to new industries.

According to the two government officials with knowledge of the plan, limited payouts under the system might result in "large" savings that could be used for new industries.

Since the details of the scheme have not been made public, they wished to remain anonymous. An email request for comment was not immediately answered by the Federal Trade Ministry of India, which is in charge of overseeing the execution of the plan.

Toys, bicycles, leather, and footwear are among the additional six industries that might join the PLI program, according to the officials. According to them, these sectors would split the 180 billion rupee allocation that is being taken from the scheme's initial budget.

India views the PLI plan as being essential to boosting the country's overall economy, which has been suffering from a lack of private investment for almost ten years and is having difficulty producing enough employment, particularly in manufacturing.

In the fiscal year that concluded in March, incentives worth a combined total of roughly 29 billion rupees were paid out. According to a government report obtained by Reuters, little has been paid to companies in industries including specialty steel products, solar modules, and car parts.

According to one of the two officials, citing a government internal analysis, the payouts might increase to approximately 110 billion rupees in the current fiscal year and to 400 billion rupees by the fiscal year 2024/25.

"The disbursements should be better than this estimate after some tweaks to the scheme," the official said, adding such tweaks would help speed up payouts and some sectors may get an additional year or two under the scheme.