Policy reforms are required in the production related incentive scheme

- Underinvestment in many sectors as per review of PLI schemes: Efforts should be made to address real concerns in each sector

The government's Production Linked Incentive (PLI) scheme is closest to the industrial policy of the country. Many PLI programs were also designed for sectors that the government believed were relevant to the country's development and economic security. Some of these are directly related to eco-friendly changes, for example, battery plans. But there are many others that are traditionally export-oriented sectors. Textile is a labor intensive sector which is also essential for employment growth. Growth in private investment in some of these sectors, such as textiles, information technology, hardware and particularly steel, has been lower than expected.

According to the review of plans by an inter-ministerial panel, investment in many sectors is poor. It is becoming increasingly clear that there are many areas that require deep policy reforms. Only then can they be truly competitive. Textile is also one such sector. It has a very important role in employment generation and people's livelihood. Certainly, sustainable growth and poverty reduction in countries like Bangladesh are the result of better performance in this sector. The government believes that if some public money is invested to increase the production of this sector, it can gain momentum.

But this did not happen. For this program Rs. An amount of more than 10,000 crores was kept aside. A very small portion of this amount has been disbursed so far. There is no indication that this will bring renewed vigor to the sector or change employment trends. Many changes to the program have already been proposed and implemented. Just last month it was reported that the textile ministry was working on yet another reform. It is time to consider that the real problem is not the proper standards of the PLI scheme but the expectation that it will fall short of deep reforms.

Some countries have performed well in the textile and clothing export sector because they have strong infrastructure, reliable trade policies with low tariffs on raw materials, employable labor force and investor-friendly regulations. Talking about these four requirements, the Indian government has paid a lot of attention to building infrastructure and simplifying regulations. However, trade policy has been largely unpredictable and the labor force has also failed to achieve the desired growth. There are also no judicial or administrative reforms that can give businesses confidence that the rules will be enforced. In such a situation, it is not surprising that few people are heeding the government's offer. Instead of talking about the amount set aside for PLI schemes, the government should try to address the real concerns of potential investors in each sensitive sector. Examples are textile and food processing sectors. PLI programs are not a solution to the problem and should not be considered an open offer. The problem with government finance is that if the government raises the eligibility criteria, public money starts going into unsustainable projects that the private sector is not serious about.