The PLI scheme introduced by the Indian Government is projected to increase India’s economic growth by 8.7 percent in the coming financial year surpassing China. However, its neighbors like Indonesia, Bangladesh, and China are expected to grow at 5.2 percent, 6.4 percent, and 5.1 percent respectively.
According to the World Bank’s Global Economic Prospects report, India’s growth is expected to be around 8.7 percent in FY 2022-23 and 6.8 percent in FY 2023-24. The PLI has been introduced to improve the investment outlook with private investments, particularly manufacturing, which will benefit from the PLI scheme.
The government launched the PLI scheme in the wake of the COVID-19 pandemic. It announced to add incentives of Rs 1.97 lakh crore over a five-year period in 13 key sectors such as telecom, electronics, auto parts, advanced batteries, pharmaceutical drugs, and solar energy components to boost production and export. Through this initiative, the country’s production is expected to increase by USD 520 billion in the next five years, Prime Minister Modi said last year.
Being an emerging economy in the subcontinent, India has a huge potential to tap into the gaps left in the market by China. Last year, the demand for semiconductors spiked which couldn’t meet the world demand due to disrupted supply chains.
On contrary, a number of semiconductor manufacturing companies have started their production in India. A stable economy coupled with attractive PLI could attract investments, and the country will become a natural choice in filling the supply chain gap caused by the pandemic and the trade war between the US and China.
“The growth outlook will also be supported by ongoing structural reforms, a better-than-expected financial sector recovery, and measures to resolve financial sector challenges despite ongoing risks,” IMF said.
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