Context

• Manufacturing can create higher productivity jobs.

What is service sector?

• The service sector, also known as the tertiary sector, is the third tier in the three-sector economy. Instead of product production, this sector produces services maintenance and repairs, training, or consulting. Examples of service sector jobs include housekeeping, tours, nursing, and teaching.

What is called manufacturing sector?

• Manufacturing is the making of goods by hand or by machine that upon completion the business sells to a customer. Items used in manufacture may be raw materials or component parts of a larger product. The manufacturing usually happens on a large-scale production line of machinery and skilled labor.

Should India focus on manufacturing over services?

• Services sector failed to create more jobs: So far, in services, we have certainly developed some advantage and we are doing rather well. Services’ share of the economy has gone up to over 50% of the GDP. However, this sector has not been able to create enough jobs in a commensurate manner. The result is that agriculture still continues to sustain nearly half of India’s workforce, which means that 15% of GDP is supporting some 45% of the workforce.
• Manufacturing can provide productive jobs: We need more productive job opportunities for the workforce to shift away from agriculture. We need to focus attention on the manufacturing sector because of the direct and indirect jobs that it can create.
• Empirical fact: It is an empirical fact that manufacturing of all productive sectors has the highest backward and forward linkages.
• Significant potential: So, all together, there is significant potential for the manufacturing sector to create higher productivity jobs for people stuck in agricultural activities. That is the future for India.

What is PLI Scheme?

• As the name suggests, the scheme provides incentives to companies for enhancing their domestic manufacturing apart from focusing on reducing import bills and improving the cost competitiveness of local goods.
• PLI scheme offers incentives on incremental sales for products manufactured in India.
• The scheme for respective sectors has to be implemented by the concerned ministries and departments.

Criteria laid for the scheme

• Eligibility criteria for businesses under the PLI scheme vary based on the sector approved under the scheme.
• For instance, the eligibility for telecom units is subject to the achievement of a minimum threshold of cumulative incremental investment and incremental sales of manufactured goods.
• The minimum investment threshold for MSME is Rs 10 crore and Rs 100 crores for others.
• Under food processing, SMEs and others must hold over 50 per cent of the stock of their subsidiaries, if any.
• On the other hand, for businesses under pharmaceuticals, the project has to be a green-field project while the net worth of the company should not be less than 30 per cent of the total committed investment.

What are the incentives offered?

• An incentive of 4-6 per cent was offered last year on mobile and electronic components manufacturers such as resistors, transistors, diodes, etc.
• Similarly, 10 percent incentives were offered for six years (FY22-27) of the scheme for the food processing industry.
• For white goods too, the incentive of 4-6 per cent on incremental sales of goods manufactured in India for a period of five years was offered to companies engaged in the manufacturing of air conditioners and LED lights.

Benefits of PLI

• The scheme has a direct employment generation potential of over 2,00,000 jobs over 5 years.
• It would lead to large scale electronics manufacturing in the country and open tremendous employment opportunities. Indirect employment will be about 3 times of direct employment as per industry estimates.
• Thus, the total employment potential of the scheme is approximately 8,00,000.

Conclusion

• In order to integrate India as a pivotal part of this modern economy, there is a strong need to step up our manufacturing capabilities.

Mains question

Q.Should India focus on manufacturing over services for job creation? Discuss the role Production Linked Incentive Scheme could play in boosting manufacturing in India.

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