What is likely to be the impact of the PLI scheme for the auto sector?

There are likely to be two major impacts of the PLI scheme. One will be on investments; the second will be on the output or production value and the third will be on the number of jobs created. It is now believed that the PLI scheme for auto sector alone could catalyse the creation of an additional 7.50 lakh jobs in India directly and if the indirect impact is also added, then it would be much larger and far reaching.

The PLI scheme is designed for products where India has a competitive advantage in producing locally. The he beneficiaries in the first round of incentives will be companies like Ford India, Tata Motors, Suzuki, Hyundai, Kia and Mahindra & Mahindra. A total of 20 automobile and auto component companies will receive incentives under the Production Linked Incentives Scheme of the government of India. Now for the impact.

PLI scheme will be available as incentives only for companies that make products presently not being manufactured in India. In short, they substitute imports. Apart from creating 7.5 lakh jobs, the PLI Auto scheme will generate output and save equivalent imports of Rs.231,500 crore over 5 years. The scheme also entails an investment of Rs.46,000 crore against the targeted Rs.27,000 crore. At least, 50% of the value addition must be local.