Recognizing the pivotal role of MSMEs, SBI Research has called for a dedicated Production Linked Incentive (PLI) scheme tailored to their specific needs. Such a scheme could enhance their sectoral contributions and promote broader economic growth in industries like textiles, garments, food processing, electronics, and more.
The PLI scheme has significantly boosted India’s manufacturing capacity by attracting new investments and stimulating substantial economic activity. According to the SBI Research report, by January 2024, 746 applications across 14 sectors have been approved under the PLI scheme, with expected investments surpassing Rs 3 lakh crore. Notably, 24 percent (176 applications) of these are from Micro, Small, and Medium Enterprises (MSMEs), highlighting the scheme’s impact on smaller businesses.
The PLI scheme has been transformative for India’s manufacturing landscape, attracting investments worth over Rs 1 lakh crore by November 2023 and generating incremental sales of Rs 8.61 lakh crore. About 40 percent of this includes exports, showcasing the scheme’s success in bolstering India’s manufacturing capabilities and global market presence.
Significant contributions to this growth have come from large-scale sectors such as electronics manufacturing, pharmaceuticals, food processing, and telecom products, with exports exceeding Rs 3.20 lakh crore. This growth underscores India’s strengthening position in global trade and its expanding industrial base.
MSMEs are vital to India’s economic development, contributing around 45 percent to the country’s exports and about 40 percent to manufacturing Gross Value Added (GVA). Their inclusion in the PLI scheme has been a game-changer, providing the support needed to scale up operations and enhance market competitiveness.
The PLI scheme has particularly benefited MSMEs in sectors like bulk drugs, medical devices, pharmaceuticals, telecom, white goods, food processing, textiles, and drones. For instance, the PLI scheme for food processing has significantly increased the sourcing of raw materials from Indian farmers and MSMEs, boosting local producers’ incomes and strengthening small and medium-sized enterprises’ supply chains.
The PLI scheme’s impact spans multiple sectors, each uniquely contributing to India’s economic fabric. The textile industry, known for its large workforce and export potential, has seen substantial benefits, with increased investments and production capacities boosting exports and creating employment, especially in rural and semi-urban areas.
The handicraft and leather industries, rooted in India’s cultural heritage, have been revitalized by the PLI scheme. Enhanced production capabilities and access to international markets have empowered artisans and small business owners, fostering sustainable economic growth.
In the food processing sector, the PLI scheme has encouraged increased domestic sourcing of raw materials, positively impacting farmers and MSMEs and strengthening the entire agricultural value chain. The electronics and auto components sectors have also been major beneficiaries, with significant investments accelerating production and exports. This has positioned India as a key player in the global supply chain, reducing import dependency and enhancing technological prowess.
Given the crucial role of MSMEs in India’s economic landscape, there is a growing call for a separate PLI scheme tailored to their needs. Such a scheme could further boost the sector’s contributions to exports and manufacturing GVA while facilitating employment generation across diverse industries like textiles, garments, handicrafts, food processing, leather, electronics, auto components, and bulk drugs. A dedicated PLI scheme for MSMEs would support their expansion, reduce India’s import dependency, particularly from China, and enhance self-reliance, strengthening India’s global market position.
