India is likely to substantially top up the allocation for ongoing Production-Linked Incentive (PLI) schemes in the February 1 budget after seeing good results, said people with knowledge of the matter. Some new sectors may be included in the programme that seeks to reignite manufacturing in India and boost exports, along with other measures to spur investments.
Allocations for sectors that have seen a high impact on the ground under active PLI schemes such as electronic manufacturing and IT hardware could be raised, people familiar with the deliberations said. Finance minister Nirmala Sitharaman had in the FY22 budget announced Rs1.97 lakh crore for PLI schemes that now cover 14 key sectors. This incentive amount, which is for the five-year period beginning FY22, may be raised in the budget.
"Overall allocation under PLI could be enhanced... It is a scheme that is seen to be making an impact on the ground," said one of the persons cited above. There may be an increase of 20-30% in the upcoming budget, another person said.
India is keen to send strong signals to global manufacturers eyeing supply chain diversification under their China+1 strategy about its intent to offer an attractive factory ecosystem.
The budget may also extend the lower corporate tax rate of 15% available for new manufacturing investments for a few more years.
"Measures to encourage private investment will be one of the areas in focus," said the person cited above, adding that expanding PLIs is one such measure being actively considered. This would be complemented by easing compliances in multiple areas, the person said.
Experts said the government should look at building upon the success of the programme.
"In a short span of time PLI schemes have evinced good interest from businesses and investors," said Vikas Vasal, national managing partner, tax, Grant Thornton Bharat. "There is a need to increase the coverage by adding more sectors to boost manufacturing and exports, besides increasing the outlay in some of the existing sectors."
Additional funding won't have a big impact on finances.
"Given the backloaded nature of payouts, it is unlikely to create a big hit to the fiscal math," said Rahul Bajoria of Barclays, agreeing with the need to build on the initial success.