Inclusive Growth & Economic Development

The Production Linked Incentive (PLI) Scheme was launched in 2020 by the Union Government in three key sectors (mobile manufacturing and electric components, pharmaceuticals and medical device manufacturing) and was later extended to 11 other key sectors with a budget outlay of Rs 1970 billion to create national manufacturing champions and generate employment opportunities for the country’s youth. The minimum production in India as a result of PLI Schemes is expected to be over US$ 500 billion in 5 years.

Role in promoting Atmanirbhar Bharat Mission:

• Creation of large-scale manufacturing capacity: The incentives under this scheme are directly proportional to production capacity/ incremental turnover. Hence, it will help develop large- scale manufacturing facilities and better industrial infrastructure, thus benefiting the overall supply chain ecosystem.
• Import substitution and export promotion: The PLI scheme aims to reduce the gap between India’s highly skewed import-export basket, which is mainly characterized by heavy imports of finished goods. The PLI schemes will promote domestic manufacturing of goods, thereby reducing our dependence on imports and help in expanding the quantum of exports from India in the long term.
• Technology transfer and skill development: The PLI Scheme will help attract foreign investment in India and along with that the advanced technology and expertise thus helping in skill development of our workforce.
• Focus on sunrise and strategic sectors: The PLI scheme covers new growing sectors such as drones and drone components, advanced chemistry cell batteries, Electronics and IT, Pharma etc. Thus, it will help India become future ready.

Challenges in realising these objectives:

• India becoming an assembly unit of imported parts: It is feared that the PLI scheme might degenerate the manufacturing units in India into the assembly of the imported parts. For example, the scheme aims to promote production of Air Conditioners in India, but the critical parts like compressors, valves and coils are being imported.
• Lack of research and development in India: The incentives under this scheme are linked to incremental sales of products manufactured in India, but lack of focus on R&D by the Indian private industry is the major structural weakness. For example, the largest share of value addition accrues the patent owners and the patent rights are kept abroad.
• Possible challenge in WTO: Earlier, Merchandise Exports from India Scheme (MEIS) was challenged in WTO for violation of the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement) and the decision was not favourable for India. If the goods manufactured under the PLI scheme significantly impacts global market prices then it might be challenged in WTO as well.
• Lacks long term approach: It is being argued that the short-term fiscal PLI incentives cannot overcome the lack of competitiveness in the long run.

Since its launch, the PLI Scheme has attracted much attention and various multinational firms are showing interest in investing in India under this scheme. Going forward, the government needs to ensure that the momentum gained by the scheme is sustained for a long-term growth.

A NITI Aayog report estimates that more than 7.5 million workers were engaged in the gig economy in 2020-21 in India. This could grow to 23.5 million workers by 2029-30, making up for 4.1% of total livelihood in India. The Gig Economy holds a great significance in India, as it provides advantages like democratization of jobs, enhancing social inclusion, cost-effectiveness, enhancing income etc. However, as gig economy is growing rapidly, gig workers face many challenges as follows:

• Lack of technology diffusion: Lack of uniform access to internet services and digital technology acts as a restrictive factor for workers willing to take up jobs in the gig and platform sector.
• Job insecurity: Lack of job security, irregularity of wages, and uncertain employment status for workers are significant challenges faced by the gig workers. Further, there is no clarity on how and when incentive structures and advancement in jobs would be provided.
• Lack of social security: There is also the challenge of paid sick leave, health access and insurance due to lack of formalisation.
• Rising stress: This is due to uncertainty associated with regularity in available work and income. Also there is stress due to pressure from algorithmic management practices and performance evaluation on the basis of ratings.
• Lack of grievance redressal mechanism: There is no authority regulating the working conditions of gig workers. For instance, when Ola and Uber started cutting back incentives, the drivers in Mumbai decided to go on ‘strike’. But there was no clarity against whom they were holding strikes.

Faced with the above challenges, following policy measures for gig workers are needed:

• Increase access to institutional credit for gig workers and those interested in setting up their own platforms.
• Unsecured loans extended to first-time borrowers in the platform economy may be classified as Priority Sector Lending.
• Skill development of youth and workforce to make them employable. Platforms can enable the creation of potential “Skill Certificates” or “Skill Passports” for workers.
• Governments can ensure universal coverage of gig workers through the Code on Social Security.
• Various benefits like paid sick leaves, health access, insurance for gig workers, retirement /pension plans, occupational disease and other contingency benefits can be provided to gig workers.

Providing social security for the rising gig economy workers is the need of the hour. Many such steps are being taken in this direction like RAISE Framework for operationalizing the Code on Social Security (CoSS), 2020 and Centre & States have been asked to adopt a five-pronged approach to ensure realisation of full access to social security for all gig and platform workers when they draw up rules and regulations under the code.