The Production Linked Incentive (PLI) scheme introduced by the government for several sectors is a good thing for the Indian economy in the long run. The telecom sector’s PLI scheme is also live since April 1, 2021, and multiple companies such as Nokia, HFCL, and other big vendors want to be a part of it. The scheme is worth Rs 12,195 crores and will provide big companies with incentives of between 4% to 6% and small companies with incentives of up to 7% if they hit the target.
However, I feel there’s one issue with the telecom PLI scheme and not just the telecom PLI; this might be the same problem with the PLI scheme for other sectors as well. The problem is that the PLI scheme focuses more on asking companies to manufacture more, not innovate more.
Telecom PLI Needs Innovation as Well
The telecom sector’s PLI scheme is giving incentives to the companies when they hit their manufacturing targets within the country in a given time frame. This would motivate companies to assemble and manufacture more products and equipment. However, it is not going to drive innovation in the industry.
I am not saying that the scheme is not good. I agree that it will add to the economy of the country in one or more ways. But while that’s good, innovation is equally important. This is something that the companies need to consider themselves.
Even the local Indian companies participating in the telecom PLI scheme will be geared to make more products. It is easy to manufacture in India and innovate in some other country for big multinational companies such as Nokia and Ericsson.
But most of the Indian companies have all their resources and facilities locally set up. Further, most of the local companies have far less money and experience than big international corporates. This means they can either completely focus on manufacturing in the telecom PLI scheme to hit the target. Or, they can risk putting resources and money in research and development (R&D) and might not hit their goal of receiving incentives from the government.
The thing is, the Indian government should also bring in incentives for innovation. I know it is hard to quantify innovation by the companies, but there are several other ways in which innovation can be rewarded. If the government can come up with a brilliant scheme such as the PLI, it can also come up with a scheme that focuses on innovation.