Suppose you are the government, and you want to stimulate the production of a particular class of goods. The demand for such goods is not all that great. But you think that once it’s mass manufactured, or sold at the right price, it should work just fine.

This is where you would use a PLI or production related incentive scheme. PLI is an ancient and common tool of governments to stimulate the production of goods deemed necessary by the state for social good, tax or employment causes.

PLIs are basically incentives for companies to promote a product. It could be in the form of tax breaks, import and export duty concessions, or perhaps easier terms for purchasing land. Generally, the benefits of the PLI scheme are passed on to the final consumers of goods in terms of lower prices.

Take, for example, electric cars. They don’t have ready demand but switching to eco-friendly cars is a must for the country. In this regard, the government has a so-called FAME scheme. It means faster adoption and manufacturing of hybrid and electric vehicles. Under this scheme, there are a lot of perks to electric car makers.

Recently, the Indian government has identified 13 priority sectors where PLI schemes will be launched with a total expenditure of Rs 2 trillion. Sectors for which incentives have already been approved are electronic or technology products, pharmaceuticals, communications and networking products, food products, high-efficiency solar modules, automotive and automotive components, specialty steel, textile manufacturing, advanced chemical cell battery, textiles, and specialty steel.

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