economics medium MCQ

The 'Production Linked Incentive' (PLI) scheme differs from traditional industrial subsidies primarily because it:

  1. Provides upfront capital grants before the factory is constructed
  2. Rewards companies based on their incremental sales from goods manufactured in India, rather than just capital investment
  3. Is exclusively available to foreign multinational corporations and excludes domestic MSMEs
  4. Provides tax holidays for 20 years regardless of production volume

Answer: Rewards companies based on their incremental sales from goods manufactured in India, rather than just capital investment

Traditional subsidies often rewarded mere capacity creation (building a factory), which sometimes led to idle plants. The PLI scheme is strictly output-oriented; it provides a financial incentive (typically 4-6%) on the *incremental sales* over a base year. This ensures that government funds only flow when a company successfully scales up production, achieves economies of scale, and actually sells goods in the market, making Indian manufacturing globally competitive.

Topic Indian Economy - Industry
Exam Relevance UPSC Prelims, SSC CGL, Banking
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