Daily Current Affairs : 22-August-2023
In recent times, a heated debate has unfolded among economists regarding the effectiveness of India’s Production Linked Incentive (PLI) scheme aimed at bolstering electronics manufacturing. This scheme was envisioned to propel India into becoming a self-reliant manufacturing powerhouse in the global arena. However, a recent paper has raised concerns that the PLI program might not be steering the country in the desired direction, instead creating an ecosystem largely reliant on imports and characterized by low-level assembly jobs.
Understanding the PLI Scheme
The PLI scheme, initiated in April 2020, has a pivotal role in India’s vision to emerge as a global hub for Electronics System Design and Manufacturing (ESDM). Specifically, the scheme targets various segments within the electronics value chain, including mobile phones, electronic components, and ATMP (Assembly, Testing, Marking, and Packaging) units. Over a five-year period, it offers Production Linked Incentives totaling up to INR 40,951 crores.
Current Status of Electronics Manufacturing in India
Over the past five years, the electronics manufacturing sector in India has witnessed remarkable growth, boasting a Compound Annual Growth Rate (CAGR) of approximately 23%. In the fiscal year 2019-20, domestic production of electronics hardware surged to $76 billion, and this sector now provides employment for over 2 million people across the nation. The most significant boost came in the realm of smartphone manufacturing, where exports skyrocketed from $300 million in FY2018 to an astounding $11 billion in FY23. Simultaneously, imports of mobile phones dropped from $3.6 billion in FY2018 to $1.6 billion in FY23.
Economists’ Perspective
Economists have scrutinized the PLI scheme closely and argue that its success in terms of exports conceals underlying issues. While imports of fully assembled mobile phones decreased, the imports of mobile phone components such as display screens, cameras, and batteries surged between FY21 and FY23. Essentially, companies are importing essential parts and merely assembling them in India to label the products as ‘Made in India.’ This low-level assembly work fails to generate well-paying jobs and lacks the economic multiplier effect that true manufacturing would provide.
The Path Forward
To ensure that the PLI program fulfills its intended objectives, several crucial steps are imperative:
1. Creating Sustainable Employment
The PLI scheme must evolve to create long-lasting jobs that uplift the economic well-being of the workforce. This involves moving beyond low-level assembly work to engage in high-value manufacturing processes.
2. Building a Robust Supply Chain Ecosystem
To further facilitate large-scale manufacturing, it is essential to develop a comprehensive supply chain ecosystem that supports the entire electronics manufacturing value chain. This includes the production of essential components and materials within India.
3. Establishing Manufacturing Clusters
Building new manufacturing clusters in the country can help consolidate resources, foster innovation, and streamline production processes. These clusters can serve as hubs for specialized manufacturing activities.
In conclusion, while India’s PLI scheme has undeniably spurred growth in the electronics manufacturing sector, it is crucial to address concerns about its long-term sustainability and the quality of jobs it generates. By focusing on creating high-value manufacturing, strengthening the supply chain, and promoting innovation through manufacturing clusters, India can secure its position as a globally competitive electronics manufacturing hub.
Important Points:
Understanding the PLI Scheme:
- PLI scheme aims to make India a global hub for Electronics System Design and Manufacturing (ESDM).
- Targets various segments within the electronics value chain, including mobile phones and electronic components.
- Offers Production Linked Incentives totaling up to INR 40,951 crores over five years.
Current Status of Electronics Manufacturing in India:
- Electronics manufacturing sector in India has grown at a CAGR of 23% over the last five years.
- Domestic production of electronics hardware reached $76 billion in FY2019-20.
- Provides employment for over 2 million people.
- Notable success in smartphone manufacturing, with exports reaching $11 billion in FY23 and reduced mobile phone imports.
Economists’ Perspective:
- Concerns raised that the scheme relies heavily on imports of components.
- Companies are essentially assembling imported parts in India, lacking high-value manufacturing.
- Low-level assembly work does not create well-paying jobs or have a significant economic multiplier effect.
The Path Forward:
- Create sustainable employment by moving beyond low-level assembly to high-value manufacturing.
- Develop a robust supply chain ecosystem to support the entire electronics value chain.
- Establish manufacturing clusters in the country to consolidate resources and promote innovation.
Why In News
The performance of the PLI scheme aimed at boosting electronics manufacturing has sparked a lively debate among economists. While some argue it has yielded significant benefits, others question its effectiveness in achieving its intended goals. This divergence of opinion highlights the complexity of evaluating such government initiatives and underscores the need for comprehensive assessments of their outcomes.
MCQs about India’s PLI Scheme for Electronics
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What is the primary concern raised by economists about the PLI scheme’s impact on employment and manufacturing quality?
A. The scheme creates well-paying jobs and has a significant multiplier effect.
B. It encourages high-value manufacturing but at a slower pace.
C. The scheme relies heavily on imports and low-level assembly work.
D. It primarily focuses on research and development, neglecting assembly jobs.
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What has been the recent trend in India’s electronics manufacturing sector?
A. Negative growth with declining production figures.
B. Rapid growth with a CAGR of approximately 23% in the last five years.
C. Stagnation with no significant changes.
D. An increase in imports while exports remained unchanged.
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What is the main objective of India’s Production Linked Incentive (PLI) scheme for electronics manufacturing?
A. To promote the export of fully assembled mobile phones.
B. To create low-level assembly jobs exclusively.
C. To establish India as a global hub for Electronics System Design and Manufacturing (ESDM).
D. To encourage the import of electronics components.
