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Think tank Global Trade Research Initiative (GTRI) in its report has said that the government should not extend financial support under the production-linked incentive scheme (PLI) to small firm-dominated products like leather shoes and handicrafts as the move may shift business away from those enterprises. It said small firms need assistance like access to technology and low-cost finance and not PLI. It also said PLI for industries like food processing or auto, where many domestic manufacturers make similar products, introduces competitive distortion by giving money to a few firms.

GTRI said PLI money at the rate 4-6 per cent of incremental sales could increase profit margins by 30-40 per cent, giving a considerable price advantage over others. It said non-PLI recipients suffer for no fault and the scheme should avoid incentivizing such sectors. It should focus only on cutting-edge product groups where India has no manufacturing capabilities.

The report suggested the introduction of PLI for clean energy technology, incentivizing local production of components and not the final product, PLI for developing expertise in basic sciences, chemistry, metals, and electronics, and for setting up industrial labs for reverse engineering. It said given the upcoming carbon border taxes by the EU and soon by other countries, India must invest in clean energy technologies.