Production Linked Incentive (PLI) to account for 13-15% capex in key sectors in 3-4 years: Crisil report

India is likely to see an incremental revenue addition of Rs 30-35 lakh crore over the next 3-4 years of Production Linked Incentive (PLI) schemes announced for various sectors, said Crisil Research in an analysis.

“The implementation of the PLI scheme will lead to a potential capital expenditure (capex) of Rs 2.5-3 lakh crore over the scheme period and will account for 13-15 percent of average annual investment spending in key industrial sectors over the next 3-4 years,” the global analytics company said in a media note.

The central government’s flagship PLI scheme, which was announced in March 2020, is operational for 15 sectors such as electronics and mobile manufacturing, solar equipment, pharmaceuticals, medical devices, automobiles and auto components, among others. Of these, the capital investment in sectors such as mobile, pharmaceuticals, and telecom manufacturing has already started, while the rest of the sectors could see these investments starting April 2022, Crisil Research noted.

“PLI will spur green investments in India, with (nearly) 55 per cent of the scheme expected to be green, in sectors such as auto for electric vehicles/fuel cell electric vehicles, solar photovoltaics, and automotive cell company (ACC) batteries. The incentive-to-capex ratio varies among sectors and is particularly attractive for mobile phones, electronic components, telecom equipment, and IT hardware, which have high dependence on imports across value chains and relatively lower domestic base,” said Hetal Gandhi, director, Crisil Research.

Though some of the sectors under PLI such as batteries and speciality steel will require greater commitment from the companies, if successful, these investments will ensure an overall development of the ecosystem even after the PLI scheme ends, it said.

Aside from supply-chain integration, PLI will also aid exports. Of the 15 sectors, nine show an export potential, ranging from 20-80 per cent of the incremental revenue generated. This, in turn, can create an annual export potential of Rs 2 lakh crore, or 6 per cent of the total exports of calendar 2021.

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