Former RBI Governor Raghuram Rajan has raised questions on PLI scheme and the cost incurred by the government to bring jobs
Former RBI governor Raghuram Rajan has asked the Centre to release the data on the amount of subsidies distributed under the production-linked incentive (PLI) scheme and the job generation which happened due to the investment. As per Rajan, this would allow a proper public assessment of the scheme which aims to establish the country in the global manufacturing supply chain.
Commenting on the Union Minister for Electronics and Information Technology Ashwini Vaishnaw’s recent claim of PLI for mobile manufacturing generating 5 lakh jobs, Rajan said in an exclusive interview with Outlook Business, “When somebody throws out a number like five lakh jobs, from where did these jobs come? Is it the case that we had to pay to get these jobs, or would they have come anyway?”
Rajan opined that due to high tariffs on mobile imports and large domestic market, firms have the incentive to produce locally. However, he added that if production is limited to just assembly, then there isn’t significant scope of local investment. “The hard to answer question is, is this here to stay? Or is it here so long as we have subsidies and tariffs? These are all questions that can best be examined by making the data publicly available, allowing people to look at it,” Rajan said.
The former RBI governor has been questioning the scheme which provides incentives based on sales of locally produced goods for the past two years. Earlier in June, Vaishnaw had hit out at Rajan over his criticism of the scheme. The minister had said back in June that the scheme has led to big change which has allowed for global firms like Cisco to think about manufacturing in India.
PLI scheme was launched three years ago with an outlay of Rs 1.97 lakh crore to boost domestic manufacturing in sectors such as mobile manufacturing, pharmaceutical drugs, bulk drugs, medical devices, and food products. Recently, PLI 2.0 for IT hardware has attracted the attention of Foxconn, Dell, Lenovo, and HP.
Questioning the value addition from the scheme, Rajan said, “We need to know what exactly is coming under value added. By some metric, and I talked to some industry people here, they are making the case for the cell phone, but not for components. The question is, when we take the component as value added, that component producer, how much did they import and how much did they simply show? So these things need detailed calculations.”
(A detailed interview with Raghuram Rajan will be published in the January issue of Outlook Business magazine)