India plans over Rs 18,000 cr in incentives to spur local manufacturing growth

India intends to provide incentives worth up to Rs 18,000 crore ($2.2 billion) to promote domestic manufacturing in six new sectors, including chemicals, shipping containers, and vaccine inputs, two government officials told Reuters.

This initiative is a component of India’s Rs 1.97 lakh crore production-linked incentive scheme (PLI), initiated in 2020, which presently encompasses 14 sectors, spanning electronic products to drones.

However, its success has been limited, with only a small portion of the PLI incentives being claimed thus far. Consequently, the government is reallocating the unused funds to newly identified sectors.

Limited payouts under the scheme could lead to “large” savings which may be redirected to new sectors, the two government officials with knowledge of the plan said.

They did not wish to be named as details of the plan have not been made public. India’s federal trade ministry that oversees the scheme’s implementation did not immediately respond to an emailed request for comment.

The six new sectors that could join the PLI scheme also include toys, bicycles, leather and footwear, the officials said. These sectors will share the Rs 18,000-crore-rupee allocation that is being carved out from the scheme’s original outlay, they added.

India sees the PLI scheme as crucial to boosting the broader Indian economy which has been starved of private investment for nearly a decade and is struggling to create adequate jobs, particularly in manufacturing.

Total incentives worth nearly Rs 2,900 crore were paid out in the fiscal year that ended in March. Little has been paid to businesses in sectors including speciality steel products, solar modules, and car components, according to a government report seen by Reuters.

In the fiscal year that started in April, the disbursements could rise to nearly 110 billion rupees and to Rs 40,000 crore by fiscal year 2024/25, one of the two officials said, citing an internal analysis by the government.

“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.

With inputs from Reuters.