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PLI scheme for semiconductors

Date: 25 December 2021 Tags: Science, Technology & Innovation

Issue

 To encourage the manufacturing of various semiconductor goods within India, the centre has sanctioned Rs 76,000 crore under production-linked incentive (PLI) scheme.

 

Background

Semiconductor chips are in short supply across the globe, resulting in reduced goods output. Goods such as cars, mobiles, laptop etc have been at the receiving end.

 

Details

  • Companies which want to manufacture semiconductor goods in India will be given financial support under the PLI scheme.

  • Cost of production will be brought down drastically through subsidy support. This encourages them to set up new factories and other facilities.

  • The move is set to end the country’s reliance on imports of semiconductors and also create jobs in manufacturing.

 

Effects on economy

  • It is expected that the move would create over 1 lakh new jobs either directly or indirectly. 

  • It will also encourage companies to invest in uncertain times as they will be having financial support from the government.

  • The spending initiated by the government is seen as an effort to boost demand in the economy. It can be a prelude to make India a global hub for electronic goods.

 

Criticism of the scheme

  • Critics say that the burden of subsidies falls on taxpayers, who will have lesser incentive to work.

  • There are fears that the demand-supply market structure may collapse as business start investing in industries that do not have demand from consumers.

  • The issue of crony capitalism comes into picture as the government and officials can decide which company or sector receives subsidies.

 

Way ahead

  • There are other factors that will decide the success of semiconductor industry and not just amount of subsidies.

  • Business environment can be improved by improving institutions. There is no need to provide subsidies to attract investments.