There is some really good news coming for India directly from the World Bank. India is all set to emerge as the fastest growing economy in the world backed by the success of the Modi government’s Production-Linked Incentive (PLI) Scheme.
India to grow at 8.7% in the financial year 2022-23
As per the World Bank, India’s economy is likely to grow at 8.7 percent in the next financial year 2022-23. On the other hand, China, Indonesia, and Bangladesh are expected to grow at 5.1%, 5.2% and 6.4% respectively in the emerging market and developing economies.
World Bank in awe of India’s PLI
The World Bank stated that it has upgraded India’s growth numbers to 8.7% in FY 2022-23 and 6.8% in FY 2023-24 “to reflect an improving investment outlook with private investment, particularly manufacturing, benefiting from the Production-Linked Incentive (PLI) Scheme, and increases in infrastructure investment.”
What is the PLI Scheme?
The PLI Scheme was launched by the Modi government amidst the COVID-19 Pandemic to bolster the manufacturing sector in the country.
The Scheme involves incentives of Rs 1.97 lakh crore over a period of five years and covers 13 sectors such as telecom, electronics, auto parts, advanced batteries, pharmaceutical drugs, and solar energy components.
The government expects that the PLI Scheme will improve local manufacturing, thereby helping the Modi government’s Aatmanirbhar Bharat (Self-reliant) India campaign. Also, it is likely to boost India’s export sector.
PLI to add 1.7 percent to India’s GDP
BNP Paribas Asset Management said that the success of PLI is expected to add 1.7 percent to the country’s GDP by 2027.
It added, “According to industry estimates, the schemes could generate $150 billion in new sales, and $70 billion of domestic value-add, or 1.7% of 2027 GDP. They could add a substantial 0.3% to annual GDP growth between 2023 and 2027. The direct impact of these schemes is likely to be larger on labour (an estimated 2.8 million new jobs) than on capital spending (estimated at $28 billion). There is likely to be significant upstream activity as a result, driving further gains in jobs and spending.”
The scheme is now helping India topple China and emerge as the world’s leading production powerhouse. In its report, the World Bank said that “growth in emerging market and developing economies (EMDEs) is forecast to moderate to 4.6 percent in 2022, as macroeconomic policy support continues to be withdrawn and the rebound in China eases.”
However, the World Bank has given a positive outlook for India. It has stated that investments in India should benefit from the resumption of contact-intensive services and ongoing fiscal and monetary support.
The PLI is changing how global manufacturing looks. China is going down whereas India is rising into a big manufacturing powerhouse.