Former RBI governor Raghuram Rajan has questioned the PLI scheme.
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This research note is written by Rajan, Rahul Chauhan and Rohit Lamba. It states that the central government should look at the figures of the PLI scheme and make a detailed assessment of how many jobs it has created, the cost of each job, and why it has not worked so far. According to a report by IANS, before 2014 there were only two manufacturing factories in the country and today their number has gone above 200. In the financial year 2023, electronic goods worth about Rs 1,85,000 crore were exported from the country. In the financial year 2022, this figure was Rs 1,16,936 crore. In this way, there has been a growth of 58% in one year.
Rajan’s claim
In order to promote mobile manufacturing in the country, the Central Government had increased the tariff on the import of mobiles in the year 2016. After this, the PLI scheme for mobile phones was launched in 2020. It has been written in the research note that in the PLI scheme, subsidy is given on the finishing of phones in the country. It doesn’t matter how much value is added to it in the country. India still imports most of the components for mobile phones. According to the data shared by Rajan, India does not export any of the major components of mobiles. These include semiconductors, PCBAs, displays, cameras and batteries. They say that the increase in tariffs on mobile phones in April 2018 has led to a spurt in imports. That is, in the PLI scheme, we have become more dependent on imports.
The former RBI governor says that with the increase in the export of finished cell phones, we cannot claim that India has become a major power in manufacturing. It is possible that the manufacturers are assembling only in India. Citing the example of Apple’s iPhone 12 Max, Rajan said Foxconn’s value addition from final assembly and testing is only four per cent of the manufacturing cost. The manufacturing cost is about one-third of the value of a mobile phone. He said that India should assess whether the six per cent subsidy being given on finished mobile phones is more than the value addition being done in the country. WTO rules do not allow linking of PLI subsidy to value addition in India. Citing these rules, Rajan said the scheme was headed for failure.
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