How does PLI scheme add GDP annually?

The production-linked incentives (PLI) scheme, which aims to increase manufacturing in strategic areas by paying over Rs 2.4 lakh crore in incentives over the next five years, can generate additional revenue that can add 4% annually to the GDP, says a report.

According to Emkay Investment Managers, the initiative has thus far had the best response from the electronics, auto components, and pharmaceutical industries. According to the analysis presented on Tuesday, the PLI scheme has the potential to generate additional money that, if fully realised, would increase GDP by around 4% annually.

The number of new manufacturing businesses registered shows that manufacturers are expanding their capacity as a result of strong returns.  Manufacturing company registrations have increased to their highest level in the last seven years, and their percentage of all registrations has nearly reached its highest level in the previous ten years.

According to the report, the number of environmental clearances requested and granted in FY22 was the highest ever, and it was 10 times higher than in FY15. The report attributes this to the structural changes made during 2018–21, which are similar to many of the events that took place prior to the 2003–06 boom cycle.

In addition to the lack of consumer demand, the research claimed that the demonetisation, the poorly implemented GST, and the pandemic all negatively impacted domestic production. As a result, up to FY18, manufacturing enterprises were reporting poor RoCEs (return on capital employed).

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