The PLI -- performance linked incentive -- scheme that was launched in 2020 is helping companies in India attain global size and penetrate global markets, which is essential for long term sustained growth of the economy, said India's G20 Sherpa Amitabh Kant.
"PLI says that we will support you year after year for five years but you keep meeting your production targets. If you don't do that you don't get the benefits. But if you get that size and scale you will become a global player," said Kant while speaking at the Business Today Mindrush event.
"It is giving you a carrot but for achieving a very high production targets and making you a global player. And we are not extending it for more than five years. So, within those five years, you become a global champion. It's a scheme for making Indian companies think big and become global champions to penetrate global markets," said Kant.
This assumes significance as ever since the PLI scheme was launched in March 2020, there have been many economists and industry players that have questioned the utility and the effectiveness of the government scheme.
On a different note, the former head of NITI Aayog said that the country cannot grow only on the back of services and there needs to be participation from the manufacturing and other segments as well.
"India cannot only grow on the back of services. It must grow on all cylinders. It has to grow on manufacturing, services, sustainable urbanisation, and also agricultural productivity," said Kant.
"The challenge for India is that 42% of the population is dependent on agriculture. You need to take this population away from agriculture and put it into manufacturing or good urbanisation. Now manufacturing will happen if you are able to penetrate global markets. If you look at India's history, every time we have grown at 8-9%, we have grown when exports have grown, and we have been able to penetrate global markets," he added.
He also said that private sector capex will kick in now and it will play a far greater role than the government in the overall trajectory of growth of the Indian economy.
"My view is that private sector capex will kick in now and India will be on a long trajectory of growth because of the private sector and not the government. The government has done its bit by putting in capex at the time it was required because that was the COVID period, and we couldn't have expected the private sector to put in money. So now you'll see with this growing and expanding balance sheets of the private sector, capacity utilisation crossing 75%," he said.
This would ultimately lead to a virtuous cycle of growth that will last over a decade, he added.