PLI scheme to attract investment of Rs 3-4 lakh crore in 4 years; Private sector capital expenditure may increase: ICRA – EQ
In Short – The Production Linked Incentive (PLI) scheme is expected to attract investments of Rs 3-4 lakh crore over the next four years, according to ICRA. This initiative is likely to boost private sector capital expenditure significantly, enhancing industrial growth and contributing to the overall economic development of the country.
In Details – The PLI scheme is expected to attract investments of Rs 3-4 lakh crore over the next four years and create 2 lakh jobs as mega projects in sectors including semiconductors, solar modules and pharmaceutical intermediates are expected to come up. Icra’s top executive said on Wednesday. Going forward, private sector capex is expected to increase in oil and gas, metals and mining, hospitals, healthcare and cement sectors, ICRA Executive Vice President and Chief Rating Officer K Ravichandran said.
However, taking private sector capital expenditure to record high levels will require the government to provide some tax breaks so that there is more disposable income in the hands of people. “Under the PLI scheme, we are expecting an additional investment of Rs 3-4 lakh crore in the next 3-4 years.Going forward, semiconductors, solar modules and pharmaceutical intermediates are some of the sectors where large projects are expected that could be capital and employment-intensive, Ravichandran said in an interview. They will create 2 lakh jobs in various sectors. The PLI scheme was announced for 14 sectors in 2021, including telecommunications, white goods, textiles, medical devices manufacturing, automobiles, special steel, food products, high-efficiency solar PV modules, advanced chemistry cell batteries, drones and Pharma included. Outlay of Rs 1.97 lakh crore.
PLI schemes have resulted in investment of more than Rs 1.03 lakh crore till November 2023 and creation of more than 6.78 lakh jobs.Regarding private sector capex, Ravichandran said private capex is expected to increase in oil and gas, metals and mining hospitals, healthcare and cement. These are the sectors that are expecting larger outlays in the medium term. However, unlike previous years, this time the capital expenditure is more towards the green energy side, renewable energy and electric vehicles.
“We need to do something on the demand front to reach higher levels of capital expenditure. At the lower end of the market, consumption in rural areas is low.On the demand front, we need to do more through tax incentives and other means…,” he said. Capacity utilization across various industries has been hovering around 75 per cent for some time now and boosting demand will be important to drive investment to the next level on the private capex front.
Ravichandran said the government is unlikely to change its public sector capital expenditure of Rs 11.11 lakh crore set in the Budget for the current financial year. “I don’t think infrastructure spending will increase from current levels.The government will follow the fiscal consolidation path. Given the need to reduce debt levels, it will be difficult to increase budgetary outlay for infrastructure…so the private sector will have to pick up the tab,” he said.
The government’s capital expenditure allocation has more than doubled from Rs 4.39 lakh crore in FY 2020-21 to Rs 11 lakh crore in 2024-25. Although in monetary terms, the capital expenditure allocation in the budget has increased in percentage terms, the increase in allocation has declined from about 35 per cent in the last three financial years to 11 per cent in 2024-25
