Many Indians on a daily basis use sophisticated goods that are either fully imported or just simply assembled in India. This is because India lacks a well-developed manufacturing supply chain that could help produce things from scratch. To tackle this, in 2020, the Central government came up with the Production Linked Incentive (PLI) scheme that proposed to promote the domestic manufacturing sector, create more jobs, and cut down on imports. Under the PLI scheme, the government has offered subsidies as high as 50% to companies producing goods, ranging from semiconductor chips to drones. Naturally, several companies have competed for these subsidies. According to the government, hundreds of companies across 14 sectors have been shortlisted to receive subsidies.
Comparing sectors
Over the years, many experts have strongly argued that India’s manufacturing sector, which contributes to about 15% of the country’s gross domestic product (GDP), is too tiny to absorb excess labour from the agricultural sector. Their contention may be true. But the only way to know the right size of manufacturing or any other sector in any economy is by letting market forces play out. At the end of the day, whether a piece of land is best used to raise a crop, or build a semiconductor chip manufacturing unit, or set up an information technology park depends on consumer demand for their final output. It is not the job of economic policymakers to promote the allocation of resources towards particular sectors; it is a job best left to entrepreneurs.
