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Discuss the rationale of the Production Linked Incentive (PLI) scheme. What are its achievements? In what way can the functioning and outcomes of the scheme be improved?

This question was previously asked in
UPSC CSE 2025 (Prelims) CSAT Official Paper (25-May-2025)

The rationale behind the Production Linked Incentive (PLI) scheme is to transform India into a global manufacturing hub by leveraging its domestic market and promoting exports. The core idea is to move away from input-based subsidies to an output-oriented approach, where incentives are directly linked to incremental sales of goods manufactured in India. This strategy aims to attract large-scale investments in key sectors, enhance the competitiveness of domestic industries, create economies of scale, and reduce import dependency. By fostering a robust manufacturing ecosystem, the scheme intends to generate employment and integrate India more deeply into global supply chains.

The PLI scheme has seen notable achievements, particularly in electronics manufacturing, where mobile phone production and exports have surged significantly. It has attracted substantial investment commitments across various sectors, including pharmaceuticals, automotive components, and medical devices. This has helped in creating a more resilient domestic supply chain for critical goods.

However, its functioning can be improved. The scheme's design could be made more inclusive for Micro, Small, and Medium Enterprises (MSMEs) by lowering investment and turnover thresholds. There is a need for more transparent and timely disbursal of incentives. Furthermore, the focus should extend beyond just assembly to encourage deeper value addition and R&D within the country. Regular, independent audits and dynamic adjustments to the scheme based on sectoral performance would ensure its long-term success and prevent potential inefficiencies.

Answered By:

Sarvesh Jha

Sarvesh Jha is a seasoned government exam mentor with firsthand success in top exams like IBPS PO, SBI PO, CDS, RRB JE, SSC CGL, BPSC, and CTET. Known for his deep conceptual clarity and strategic approach, he has guided over 5000 students through personalized mentorship. He has been creating well researched content for last 5 years.

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