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In News: The Ministry of Electronics and Information Technology will use the Rs. 1,500 crore earmarked in Budget 2021-22 to augment safety and infrastructure of the digital payments systems.
Production Linked Subsidy Scheme
- In March 2020, the scheme was introduced to boost domestic manufacturing and cut down on import bills.
- Aims
- To give companies incentives on incremental sales from products manufactured in domestic units.
- To encourage local companies to set up or expand existing manufacturing units.
- To make India more compliant with its World Trade Organisation’s (WTO) commitments and also make it non-discriminatory and neutral with respect to domestic sales and exports.
Need
- Lack of Funds with Government: Government cannot continue investing in capital intensive sectors as they need longer times to start giving the returns.
- Also, the government needs to prioritise its spending for people’s welfare.
- Incentivise Local Industries: It will instill a feeling of upgrading systems to maximise production to reap benefits of the subsidy.
- Promote FDI from foreign countries: There is a need to invite global companies with adequate capital to set up capacities in India.
- It will make Indian production more competitive and technology driven.
- Focus of Government on Labour intensive industries: Government by puting the capital intensive sectors like electronics and pharmaceuticals, etc. under PLI can focus on labour intensive sectors like garments and leather.
Sectors under PLI
- Electronics.
- Pharmaceutical.
- Software.
Challenges
- Past SEZs failed: Similar scheme of Special Economic Zones (SEZs) has not yielded desired results.
- Export Incentive Schemes created confusion: The new rules and regulations were marred with procedural delays and created confusion by a new set of rules and regulations.
- Possible operational inefficiencies and challenges: Although it has succeeded in boosting mobile manufacturing, utmost care must be taken while extending it to other sectors.
- Need is to change the business ecosystem: There are other structural problems in Indian Economy which need equal focus.
Way Ahead
India must learn from past mistakes while creating a Special Economic Zone and implementing Export Linked Subsidy. Further the target should be holistic rather than just boosting the supply spectrum of Indian Market.
Source: IE
