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Gains from PLI should be more durable

The Reserve Bank of India Governor Shaktikanta Das said the industry has to exploit the government’s Production Linked Incentive scheme that has been rolled out for various sectors including automobile as industry is still reluctant to invest in creating capacities despite record low interest rates.

“The Production Linked Incentive (PLI) scheme announced by the government for certain sectors is an important initiative to boost the manufacturing sector” said RBI governor Shaktikanta Das at the National Management Convention of the All India Management Association on Wednesday. “It is necessary that the sectors and companies which benefit from this scheme utilise this opportunity to further improve their efficiency and competitiveness. In other words, the gains from the scheme should be durable and not one off”

A recent RBI study pointed out that banks and financial institutions sanctioned only 220 project proposals of the private companies during 2020-21,a record low in the recent years. The total cost of projects sanctioned too declined sharply to Rs 75,558 crore in 2020-21 from Rs 1,75,830 crore in 2019-20. However, some high there are signs of improvement in Capex and one such indicator is pick up in FDI inflows. FDI equity inflows doubled to $20.8 billion during April-July’2021 from $10 billion a year ago.

To help improve investment climate and better attract FDI inflows, the government has introduced production linked incentive schemes across various manufacturing sectors, lowered corporate tax rates with additional cuts for new manufacturing facilities, and undertaken farm and labour reforms among other measures.

“As pandemic scars heal and supply conditions are restored with productivity gains that typically accrue after a large shock, a sustained easing of core inflation can be expected and this will reinforce the growth-supportive stance of monetary policy” the Reserve Bank has said in its latest assessment of the Indian economy in its September monthly bulletin.

Underscoring the role of global trade in faster economic recovery, the governor stressed the need to push exports to newer destinations and also focus on high-tech exports. ” India’s exports of agricultural commodities, including Geographical Indications (GI) certified products to newer destinations, offer favourable prospects for overall export” the governor said. “Furthermore, exports of engineering goods – which account for around one-fourth of India’s total exports – experienced robust growth across product categories and newer markets. To further strengthen the export potential, there is a need to enhance the share of high-tech engineering exports to achieve an ambitious engineering export target of US$ 200 billion by 2030”. TechiLive

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