What is India's new $2bn-worth PLI scheme for IT hardware
The Indian government has finally heard the pleas of the IT industry. On Wednesday, the Union Cabinet chaired by Prime Minister Narendra Modi approved the production-linked incentive (PLI) scheme 2.0 for IT hardware. The cabinet more than doubled the budgetary outlay of the scheme to Rs. 17,000 crore. Let's take a look at what the new PLI scheme entails.
Why does this story matter?
India has been putting a lot of emphasis on becoming an electronics manufacturing hub. The country is now the second-largest mobile manufacturer globally. The PLI scheme for mobile phone production played a significant role in making India a manufacturing powerhouse. With the global IT hardware industry struggling due to supply chain constraints, India has an incredible opportunity to race ahead with PLI 2.0.
PLI 2.0 for IT hardware will run for 6 years
The latest version of the PLI scheme for IT hardware will run for six years, said union minister Ashwini Vaishnaw. It will promote the local production of laptops, tablets, all-in-one personal computers, servers, and ultra-small form factor devices. The first PLI scheme for IT hardware was launched in 2021 with a budgetary outlay of Rs. 7,350 crore.
Only 2 out of 14 companies met PLI 1.0 target
The first PLI scheme for IT hardware encompassed laptops, tablets, all-in-one PCs, and servers. It failed to take off with only two (Dell and Bhagwati) of the 14 approved companies meeting the first year's target. According to companies, inadequate sops affected PLI 1.0. Companies had been calling for a revised version of the scheme with an enhanced outlay.
The scheme is expected to create 2 lakh total jobs
With PLI 2.0, the government plans to attract global IT manufacturers to set up their production bases in India. The new scheme is expected to result in an incremental production value of Rs. 3.35 lakh crore and increase investment by Rs. 2,430 crore. The government estimates the scheme to create 75,000 direct jobs. In total, it could generate two lakh opportunities.
Average incentive under PLI 2.0 is more than PLI 1.0
The previous version of the scheme was criticized for the minimum investment requirement. The government has decided to continue with that criteria. However, the average incentive for PLI 2.0 is more than its predecessor. Under the previous scheme, it was 2.2% over five years. Now, it is 5.3% over six years. Companies that choose to manufacture certain components locally will get additional incentives.
