InvestorQ : Is it true that the PLI scheme of the government is likely to drive capital expenditure in India in the next few years?
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Is it true that the PLI scheme of the government is likely to drive capital expenditure in India in the next few years?

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swati Bakhda answered.
1 month ago
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The productivity linked incentive scheme or the PLI scheme was launched by the government in the previous year to provide special incentives to encourage Indian companies to produce import substituting products in India. It was also meant to encourage global players to make a manufacturing hub by making the best use of these productivity linked incentives provided to them.

Now a report from CRISIL has highlighted the importance of this PLI scheme and expects it to drive capex in India in the coming quarters. According to the India Outlook Report published by India’s foremost rating agency CRISIL, capital outlay in industrial sectors could increase by 45-55% in FY22. These are likely to be largely driven by the Productivity Linked Incentive or PLI scheme of the government of India.

The report by CRISIL also pegs the GDP growth at above 11% in FY22, in the aftermath of an 8% contraction in FY21. Specifically, capex is expected to increase in sectors like pharma, chemicals, textiles, cement, auto, metals, auto ancillaries and hydrocarbons. This is again likely to be a big boost considering that capex is likely to contract by a whopping 35% in the financial year FY21.

The report has also highlighted the downstream benefits of leveraging this PLI scheme like saving billions of dollars in import bills, especially in the case of imports of chemicals and IT hardware inputs from China. In the year 2020, India ran into a major supply chain bottleneck in sectors like automobiles, chemicals and IT hardware as they relied too heavily on China for inputs. That can now be avoided if the PLI scheme takes off in a big way.

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