PLI Scheme Boosted Manufacturing FDI By 76% In FY22, Says Government

PLI schemes led to a 76% increase in foreign direct investment in the manufacturing sector in FY22.

Production-linked incentives in sectors such as drugs and pharmaceuticals, food processing, and medical appliances have contributed to an increase in foreign direct investment, according to data released by the Department for Promotion of Industry and Internal Trade.

FDI under the manufacturing sector in FY22 stood at $21.34 billion, as compared with $12.09 billion in the previous year, according to the release issued on Tuesday.

PLI schemes led to an increase in FDI inflows in drugs and pharmaceuticals (+46%), food processing industries (+26%) and medical appliances (+91%) from FY22 to FY23, it said.

PLI schemes, which were first approved in March 2020, have since been announced for 14 sectors, with a total incentive outlay of Rs 1.97 lakh crore, to strengthen production capabilities domestically.

The scheme has also propelled exports, changing the export basket from traditional commodities to those of high value products—such as electronics and telecommunication goods, processed food products mng others, the release said.

PLI-led exports are at Rs 2.6 lakh crore as of FY23, according to DPIIT data.

One of the biggest achievements credited to the PLI scheme is the fillip it has given to domestic mobile manufacturing. For instance, Apple suppliers, such as Foxconn, Wistron Information Technology and Services Corp. and Pegatron Corp. have benefited from the scheme.

According to the data, 82% of the total mobile phone exports were by PLI companies during FY23.

Total exports due to the PLI scheme for large-scale electronics manufacturing stood at Rs 1.3 lakh crore, as of March 2023.

The value addition has increased to 23% and 20% in electronics and mobile manufacturing, respectively from 'negligible levels' in 2014-15, according to Rajeev Singh Thakur, additional secretary of DPIIT.

According to Rajesh Kumar Singh, secretary of DPIIT, the value addition in mobile manufacturing in India is to the tune of 20%.

“We have been able to increase the value addition in mobile manufacturing to 20%, within a period of three years, whereas countries like Vietnam achieved 18% value addition over 15 years and China achieved 49% value addition in over 25 years. Seen in this perspective, it is a big achievement,” Singh said.

As of FY23, electronics is India's top sixth export, and the country is the second largest manufacturer of mobile phones in the world—jumping from 6 crore mobile phone units in FY15 to 32 crore units in FY23.

Now, 99.2% of the mobile handsets being used in India are made in the country, as compared with 2015, when 74% of mobile phones sold in India were imported, Thakur said.

Manufacturing of various components like battery, chargers, and camera modules, are now localised and companies like the Tata Group have entered the component manufacturing ecosystem, he said.

There have also been opinions offering a contrarian perspective on the rise in exports. In a LinkedIn post, former RBI Governor Raghuram Rajan said that the surge in India's mobile phone exports masks the full picture.

The exports are accompanied by imports of inputs that go into making these devices, masking the real value of net exports, Rajan said.