SBI Research Suggests Special Incentives for Small Businesses in India
New Delhi, India – SBI Research has proposed a dedicated Production Linked Incentive (PLI) scheme for Micro, Small, and Medium Enterprises (MSMEs) to enhance their contribution to the economy. The PLI scheme has been crucial in boosting India’s manufacturing capacity by attracting new investments and generating significant economic activity.
As of January 2024, 746 applications have been approved under the PLI scheme across 14 sectors, with an expected investment of over Rs 3 lakh crore. Notably, 24% of these applications are from MSMEs, highlighting the scheme’s positive impact on smaller businesses.
The PLI scheme has attracted investments worth over Rs 1 lakh crore as of November 2023 and has led to incremental sales of Rs 8.61 lakh crore, including an export share of around 40%. This success is evident in sectors like electronics manufacturing, pharmaceuticals, food processing, and telecom products, which have seen exports exceeding Rs 3.20 lakh crore.
MSMEs are vital to India’s economic development, contributing about 45% to the country’s exports and 40% to manufacturing Gross Value Added (GVA). The inclusion of MSMEs in the PLI scheme has been transformative, providing them with the support needed to scale up operations and enhance market competitiveness.
The PLI scheme has particularly benefited MSMEs in sectors such as bulk drugs, medical devices, pharmaceuticals, telecom, white goods, food processing, textiles, and drones. For example, the food processing sector has seen increased sourcing of raw materials from Indian farmers and MSMEs, boosting local producers’ incomes and strengthening supply chains.
The textile industry, known for its large labor force and export potential, has also benefited significantly from the PLI scheme, leading to increased investments, production capacities, and employment opportunities, especially in rural and semi-urban areas.
Handicraft and leather industries have received a boost through enhanced production capabilities and access to international markets, empowering artisans and small business owners. The electronics and auto components sectors have seen major investments, accelerating production and exports, and positioning India as a key player in the global supply chain.
Given the crucial role of MSMEs, there is a growing call for a separate PLI scheme tailored to their needs. Such a scheme could further boost their contribution to exports and manufacturing GVA, create jobs, and reduce dependency on imports, particularly from countries like China. By empowering MSMEs with targeted incentives, India can enhance its self-reliance and strengthen its global market position.
