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Production Linked Incentive Scheme UPSC NOTE


What is Production Linked Incentive (PLI) scheme?

  • The PLI scheme was conceived to scale up domestic manufacturing capability, accompanied by higher import substitution and employment generation.

  • PLI Scheme offers incentives to companies based on incremental sales in domestic facilities.

  • The PLI scheme guarantees 4-6 % incentives to companies for the step-by-step sale of manufactured goods in the country.

  • The PLI schemes’ goals include Make in India.

  • PLI Scheme was first established in April 2020 for the Large Scale Electronics Manufacturing sector.

What is Production Linked Incentive (PLI) scheme?

  • The Atma Nirbhar Bharat initiative in India inspired the introduction of this program.

  • So far, the government has announced PLI schemes for 14 sectors including:

  • Automobile

  • Renewable energy

  • Solar Modules

  • Auto components

  • Electronic systems

  • Aviation

  • Telecom

  • Food processing

  • Textiles & Apparel

  • Chemicals

  • White goods

  • Medical devices

  • Pharmaceuticals

  • Metals & mining

What is Production Linked Incentive (PLI) scheme?


  • Based on incremental sales.

    • They can be as low as 1% for electronics and technology products 

    • or as high as 20% for the production of specified drug intermediaries and important key starting medicines.

  • Based on sales, performance, and local value addition over a five-year period in some industries. 

    • Such as advanced chemical cell batteries, textile products, and the drone industry.

What is Production Linked Incentive (PLI) scheme?

Eligibility Criteria:

  • The eligibility criteria vary for different sectors under the PLI scheme.

  • Companies must have a registered manufacturing unit in India.

  • The applicant must touch the inception point to be eligible for the cost of the incentive. 

    • ₹10 crore for the MSMEs.

    • ₹100 crore for others.

    • ₹1000 crore for investment-oriented companies.

What is Production Linked Incentive (PLI) scheme?

Eligibility Criteria:

  • The applicant can open a new unit or take an incentive for operating the existing unit.

  • The scheme would support resource-friendly expenditure, including machinery, equipment, and technical enhancement, and would avoid expenditure for land and building.

  • PLI Yojana invites foreign companies to set up their units in India and encourages domestic enterprises to expand their production units.


  • Introduction of non-tariff rules to increase the rate of imports.

  • Increase job opportunities.

  • Development of domestic industries by giving incentives.

  • Stable economy.

  • Reduce India’s dependence on China and other foreign countries.


Organised sectors:

  • In India is the demand is shifting from the unorganised to the organised sector because of the various steps that the government has taken. 

  • That has led to the further marginalisation and decline of sectors where employment generation is high.

  • The bulk of the PLI is focused on the organised sector in which employment generation is very little because of automation.


Demand side problems:

  • At the macro level, PLI is a freebie to the corporate sector. And it is based on the idea of supply side economics.

    • We give incentives to the private sector to produce, but this will not work when demand is short. 

Inadequacy of R&D:

  • Inadequacy of research and development (R&D) by businesses. Imports deter local R&D.

  • India invests much less than what most dynamic economies spend on R&D. 


Inadequacy of R&D:

  • Indian businesses spend less than others because investment in R&D is very risky.

  • Problem of repeatedly import technology rather than build internal strength.

Other problems:

  • No Common Set of Parameters:

  • The goal for Businesses for Incentives too high.

  • Domestic Businesses relied on one or two supply chains.

Way forward

  • Rather than protect large-scale industries, we need to boost the micro sector, which is where the bulk of the employment is, so that we can generate enough demand in the economy.

  • Shortage of demand and economic slowdown should be the number one priority to be dealt with.

  • Begin by investing in or developing certain core sectors, it will help in propelling development at large.

Way forward

  • In the current context, consider semiconductor industry or the electric vehicles industry as a core sector which will help in fostering industrialisation.

  • Targeting is very important when you decide to incentivise certain industries.

  • Rather than targeting certain strategic sectors we must look at the future of sustainability consideration such as green industries.

  • We need to be watchful of what other governments are doing and develop our own strategies accordingly.

Way forward

  • To boost demand reduce inequalities, so that demand for mass consumption items will give a boost to the economy as a whole.

  • Create good employment data.

  • Build internal strength 

  • R&D investments have to be enhanced.

  • Infrastructure has to be fixed.

  • The quality of education has to be improved at all levels.

  • Cronyism, and the bureaucratic approach needs to be relaxed. 

Way forward

  • Which companies and which sectors get the subsidy and which get the priority then is influenced by cronyism to a large extent in the Indian context.

  • Subsidies need to be distinguished.

  • Specific subsidy is given to sectors or to companies and are based on micro-level decisions that are taken by the government. In that case cronyism can play a negative role there.

  • Indirect taxes tend to be regressive, so those at the bottom need to be supported by subsidies.



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Production Linked Incentive Scheme UPSC NOTE
Production Linked Incentive Scheme UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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