PLI scheme’s hub & spoke model to help MSMEs access GVCs: Ajay Sahai, FIEO

The Production Linked Incentive Scheme (PLI) is a well directed scheme that would not just spur India’s manufacturing and export capabilities, but would also add a fillip to MSMEs’ linkages with global value chains, believed Ajay Sahai, Director General & CEO, Federation of Indian Export Organisations (FIEO).

Negating the notion that the benefits of the PLI scheme have been limited to larger firms, Sahai said the spillover benefits of the scheme are bound to effectively reach the MSMEs too.

“I believe the PLI schemes would result in a hub and spoke model, where large companies will set up their manufacturing capacities and MSMEs will evolve around them as ancillaries. We have seen that happen successfully in case of the automotive sector,” he opined. Sahai was speaking today at an event titled ‘Business Across Borders 2022’ hosted by Dun & Bradstreet.

He added that despite the pandemic, 50% of the trade happens through global value chains only – and barring the automotive and gems and jewellery sectors, the country’s ‘depth’ in its offerings to global value chain (GVCs) — remains low.

“The PLI scheme will play a key role in giving India’s export a quantum jump in the coming times. 50% of the GDP contribution in 2021-22 will come from the exports sector. An additional GDP of about $300 billion-$500 billion will be contributed by this sector. With customs tariffs coming down and many trade facilitation measures being implemented, the ease of doing business should get a boost,” Sahai said, adding that India is now pushing FTAs with complementary economies.

In his view, the country needs to incentivise R&D investment to better face global competition. “Our R&D investment is lowest among our major competitors – be it south Korea or Malaysia — and thus some kind of tax concessions on R&D should be provided,” he added.

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