IT hardware cos struggle to meet FY25 PLI target on lack of orders
India’s ambitious Production Linked Incentive (PLI) scheme for IT hardware, launched in 2021 to boost domestic manufacturing, is facing headwinds as companies struggle to secure orders and meet the ambitious targets set for FY25. The scheme, which offers incentives based on incremental sales of domestically manufactured IT hardware, has been met with mixed success so far. While some companies have made strides, the overall performance has been hampered by factors like weak demand, supply chain disruptions, and fierce competition from established global players.
The PLI scheme, aimed at attracting investments and creating jobs in the sector, had set an ambitious target of ₹1.75 lakh crore in incremental sales for FY25. However, according to industry estimates, the current pace of manufacturing and order intake suggests that the target is unlikely to be achieved. While the scheme has managed to attract investment from domestic and foreign players, including giants like Apple, Dell, and Samsung, the actual manufacturing activity has not kept pace with the planned targets. One of the key reasons for this gap is the sluggish demand environment, particularly in the post-pandemic period.
Consumer demand for IT hardware, including smartphones, laptops, and tablets, has weakened as economic uncertainties have slowed down purchases. Businesses are also adopting a more cautious approach to spending, impacting demand for server hardware. Furthermore, the scheme faces stiff competition from established global manufacturers with long-standing supply chains and economies of scale. While the PLI scheme aims to incentivise local production, the lack of established supply chains, skilled labor, and infrastructure within India continues to be a significant challenge.
Moreover, supply chain disruptions caused by the ongoing global chip shortage have added to the woes of the sector. While the PLI scheme offers attractive incentives, it is crucial to acknowledge the structural limitations within the Indian ecosystem. The focus needs to be on fostering a vibrant and competitive domestic IT hardware manufacturing industry, rather than solely relying on the lure of incentives. This involves investing in building a robust supply chain ecosystem, attracting and training a skilled workforce, and streamlining regulatory procedures to create a conducive environment for growth.
Addressing these challenges requires a holistic approach. It is not just about attracting investments; it’s about fostering a vibrant ecosystem where Indian companies can compete effectively with global giants. The PLI scheme is a stepping stone, but it needs to be coupled with strategic interventions in building infrastructure, enhancing skill development, and streamlining regulations to achieve its full potential. The government, along with the industry, must work together to create an environment where India can emerge as a global hub for IT hardware manufacturing.
The current slowdown in orders is a temporary setback, and the government remains optimistic about the long-term prospects of the PLI scheme. However, it is essential to take proactive steps to address the underlying challenges and create a supportive environment for growth. The government needs to continue its efforts to improve the ease of doing business, incentivize research and development, and attract foreign investment to accelerate the development of a robust and competitive domestic IT hardware manufacturing ecosystem. Only then will India be able to reap the full benefits of the PLI scheme and achieve its ambitious goals for the sector.
