Fearing WTO backlash, govt puts on hold textile PLI export targets

Govt officials say they are cautious as they don't want to be trapped in the WTO quagmire

The central government has changed its strategy towards its flagship scheme for manufacturing - production-linked incentives (PLIs) — by pulling out any export-related projections, as it wants to stay away from any backlash at the World Trade Organization (WTO). As such, it did not spell out any export-related projections in PLI for textiles, approved by the Union Cabinet last week. 

Government officials told Business Standard that even as the scheme has been carefully designed, and is compliant with the global trade body’s norms, they are cautious as they don't want to be trapped in the WTO quagmire.

Until now, the government had been drawing up projections and outcomes in terms of increase in investment, production, employment, as well as exports, pertaining to each and every PLI scheme.

For instance, an official statement released by the commerce and industry ministry in April said the PLI scheme for mobile manufacturing and specified electronic components is expected to lead to a total production of around Rs 10.5 trillion over five years, of which more than 60 per cent is expected to be exported.

In the case of white goods, the government expected exports worth Rs 64,400 crore over five years. In the case of food products, it is expected to be Rs 27,816 crore; for telecom and networking products, Rs 2 trillion.

Over the last one and a half years, the Cabinet has approved 12 PLI schemes pertaining to various sectors, such as steel, food processing, white goods, mobile phone manufacturing, telecom equipment, among others, to improve cost competitiveness of locally produced goods, create employment opportunities, and curb cheap imports.

According to government estimates, the scheme will result in minimum production of more than $500 billion in five years.

Even as the scheme for textiles may eventually boost exports, the idea is to incentivise production, said a senior government official.

“When production increases in India, good quality products are made, then the quality and productivity together raise the competitiveness of India's product, and naturally its export potential increases as well,” said Commerce and Industry Minister Piyush Goyal last week.

Experts believe the government’s change in strategy is a step in the right direction.

“This is the right move. The government should not give any export-related projection as the scheme is giving incentive on production, not export. Providing any export-related projections will undercut the government’s own argument,” said Anwarul Hoda, chair professor of Indian Council for Research on International Economic Relations’ Trade Policy and WTO Research Programme.

A few years ago, a WTO ruling had stated that certain export incentive projects, such as the Merchandise Exports from India Scheme, had violated the provisions of the trade body by giving export subsidies on a wide range of goods. Thereafter, India had to put an end to the scheme and launch a fresh scheme to ‘support’ exporters.