The Union Cabinet approved a mega Production Linked Incentive (PLI) scheme with a total outlay of Rs 1.4 lakh crore on November 11, 2020.
The scheme focuses on 10 sectors with the highest outlay of Rs 57,000 crore for India's auto sector.
Other sectors include battery manufacturing, pharmaceuticals, telecom, food products, textiles, solar PV modules and specialty steel.
The government will now be bringing individual PLI schemes for all ten priority sectors. Draft schemes are now being scrutinised by the finance ministry and will go to the Cabinet for final approval.
One of the reasons why the government has decided to go for a PLI scheme to boost exports and create economies of scale is because the Merchandise Exports from India Scheme (MEIS) did not yield the desired results.
While the liability for the government under MEIS increased from Rs 20,000 crore to Rs 40,000 crore in FY20, exports grew only marginally.
There was a view that the focus must be on certain priority sectors and champion OEMs with scale and market access.
So will the PLI scheme help improve India's manufacturing prowess and should the auto PLI scheme incentivise creating world size companies?
In an exclusive interaction with CNBC-TV18's Parikshit Luthra, Mahindra & Mahindra's MD Pawan Goenka said, "The PLI scheme is focused on champion sectors and companies and that perhaps would yield better results in terms of making ourselves export competitive in the industries that we have somewhat of a right to win."
Goenka said, "I would personally hope that there is not too much tinkering that is done based on all the lobbying that is happening today to the scheme that was originally intended."
Parikshit also spoke to Rajiv Bajaj, MD of Bajaj Auto, who said, "It is a well-proven marketing mantra, that when in trouble, narrow your focus. So one has to make a sacrifice to achieve something. So in that sense whether it is the OEMs or whether it is the component manufacturer, I definitely feel that the government is correct in choosing to focus. Whether that focus should mean Rs 10,000 crore for one or Rs 1,000 crore for the other, that is a matter of detail. A more broad based approach is not going to give us any results because there is no point in scaling mediocrity, one has to scale excellence."
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