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Manufacturing PLI to remain in focus

ICICI Securities 24 Jan 2022

We expect the government to announce new Production-Linked Incentive (PLI) Schemes for wearable/hearable devices in the upcoming budget. Apart from new PLI, the government may also review existing PLI of IT hardware to increase the incentive from ₹ 7,325 crore to ₹ 20,000 crore to attract more investments.

PLI schemes are a cornerstone of the Government’s push for achieving an Atmanirbhar Bharat. The objective is to make domestic manufacturing globally competitive and to create global Champions in manufacturing. The government has already announced PLI Schemes for 13 key sectors along with incentives worth ₹ 1.97 Lakh Crores. The incentive is expected to boost domestic production worth US$ 500 bn over the next five years.

For the automobile space in particular, which forms large part of manufacturing GDP, the government is currently running three PLI schemes namely Advance Chemistry Cell (ACC; with an outlay of ~₹ 18,000 crore) for battery storage domain, Automobile OEM & Auto Component Scheme (outlay ~₹ 26,000 crore) and Semi-Conductor & Display manufacturing policy (outlay ~₹ 76,000 crore) which are largely aimed at making India self-sufficient in critical components as well as promote clean mobility (electrification). Hence from the budget standpoint, we don’t expect any new PLI scheme for the automobile space. One wish list however would be robust allocation towards Fame-II scheme which offers demand incentives and shall further push electrification domestically.  

Key sector to benefit: Consumer Electronics

Key stocks to benefit: Dixon Technologies (India) Ltd.