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The manufacturing sector’s capital expenditure is poised to rise with overwhelming responses to government’s production-linked incentive schemes. This includes especially lithium-ion battery, solar module and pharma sector the report said.
The PLI (Production-Linked Incentive Scheme) has attracted strong response from green initiatives such as renewable energy and advanced chemical cell (ACC) battery manufacturing, according to ICRA Ratings.
The report stated that this shows that the scheme is on the right track to revive manufacturing capex (capital spending).
Encouragement in some sectors has led to the government extending the scheme for the second round. It has also increased or plans to increase the outlay in some sectors.
After receiving positive responses to the initial round of the scheme, which cost Rs 4,500 crore, the government increased the outlay for solar PV module production to Rs 24,000 crore in FY23.
Rohit Ahuja (head of outreach and research at ICRA), said that the scheme’s success indicates that the government is serious about increasing manufacturing capital. It is possible that the outlay in certain sectors, particularly green initiative space, will be increased.
He warns that execution delays in some sectors could be a problem due to rising input costs and anti-inflationary actions.
According to the waitlist from the first round of bidding, it seems the entire Rs 24,000 crore PLI outlay would be well covered.
Similar responses were seen in the ACC battery PLI scheme. Applications were received for 110 gw, as opposed to 50 gw, the report stated. The report also suggested that the government might consider increasing its outlay for this sector.
It said that the PLI scheme for semiconductors received applications for 80 percent of the total expenditure of Rs 76,000 crore in its first round. This was despite the fast timeline for submissions.
Positive responses have been received in a number of other industries, including pharma and automobile.
The report said that drone manufacturing and other sunrise sectors received positive responses, as well as enough applications in the period of 20 days.