Davos 2024: What Raghuram Rajan didn't get right on PLI? DPIIT secretary explains

Rajesh Kumar Singh, secretary in the Department for Promotion of Industry and Internal Trade, said the debate over value addition in PLI was confined to small segment and missing the big picture. Singh was responding to a question by Business Today's Executive Director Rahul Kanwal on former RBI governor Raghuram Rajan's argument that manufacturing was a missed bus for India. 

"I don't think he's really seen the scheme...this business of value addition is limited, In automobile manufacturing in particular, the threshold itself specifies the domestic value addition of 50%. You don't get any money until you hit that threshold."

The beauty of the scheme, he said, is the company has to invest, start selling and reach a certain threshold to get the money. Incentives are back-ended and investment is front-ended.  "We have given less than 2% of money so far and attracted over 35% of investment already into India, generating lakhs," he said on the sidelines of the World Economic Forum in Davos. 

Rajan had raised doubts about the efficacy of the government’s PLI schemes and posited that the PLI scheme for smartphones gives out more money in handouts to companies than the domestic value addition that happens in assembling the devices.

"In case of mobile mobile manufacturing, you'll find that value addition has been attained in just 2-3 years of the operation of the scheme, which is very high at about 18-20% given the fact that after so many years of manufacturing ecosystem in China, their value addition is only about 49%." 

Singh said the good elements of the scheme were getting lost because of the value addition argument, which "in any case is confined to a very small segment", adding that it is a self-paying scheme. "The amount that is being generated from the sales through GST to income tax is going to ultimately far outweigh particularly in value terms whatever little subsidy that we're giving. So I think he's dead wrong." 

The session was powered by Motwani Jadeja Foundation with conglomerate partner Darwin