Economics • Indian EconomyHard
What is the primary structural mechanism of the 'Production Linked Incentive' scheme launched by the Government of India across key manufacturing sectors?
A. Providing direct financial subsidies calculated as a percentage of incremental sales over a base year to domestic and foreign manufacturers to boost domestic production capacity✓ Correct Answer
B. Waiving corporate income tax liabilities indefinitely for all industrial enterprises located within designated special economic zones
C. Extending interest-free long-term loans from the central bank directly to retail consumers purchasing domestically manufactured automobiles
D. Levying prohibitive protective tariffs on all imported manufactured goods while nationalizing private supply chains
💡 Solution & Explanation
The Production Linked Incentive scheme provides financial incentives based on incremental sales of products manufactured in domestic units, aiming to enhance manufacturing competitiveness and attract large-scale investments. By linking incentives directly to output and performance, it encourages efficiency rather than mere capacity creation. Mistaking it for permanent tax holidays or nationalization ignores its performance-based incentive structure. The scheme covers critical sectors including electronics, pharmaceuticals, and specialty steel.
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