Consider the following statements: Statement-I: India accounts for 3.2% of global export of goods. Statement-II: Many local companies and some foreign companies operating in India have taken advantage of India's 'Production-linked Incentive' scheme. Which one of the following is correct in respect of the above statements?
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- ABoth Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I
- BBoth Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I
- CStatement-I is correct but Statement-II is incorrect
- DStatement-I is incorrect but Statement-II is correct
Show answer
Answer: (D) Statement-I is incorrect but Statement-II is correct
Statement-I is wrong:
India's share in global merchandise trade is only about 1.8-2.1%, not 3.2%.
Statement-II is correct:
The PLI (Production Linked Incentive) scheme is open to both domestic and international companies — Samsung and many Indian firms like Dixon Technologies participate.
So Statement-I is wrong but Statement-II is correct.
Answer is (d).
India's actual share in global merchandise exports is around 1.8-2.1%, significantly lower than the 3.2% figure given in the question.
The PLI scheme launched in 2020-21 received major expansion and budget allocations during 2021-23, making it a key policy focus for UPSC.
UPSC is testing whether students can distinguish between actual trade statistics versus aspirational targets, while also checking knowledge of PLI scheme participants.
India's Global Trade Share
Indian Economy 3.2% of global export global export of goods
India's Share in Global Merchandise Trade: Facts & UPSC Traps
India's share in global merchandise exports is approximately 1.8-2.1%, not 3.2%
India ranks around 17th-19th in global merchandise exports
Services exports share is higher than goods exports for India
China leads with approximately 14-15% of global merchandise exports
Context
India's trade performance is a key economic indicator that UPSC frequently tests. The actual figures are much lower than what aspirants often assume.
Trade Share Reality
Indicator | Actual Figure | Common Misconception |
|---|---|---|
Merchandise Exports Share | 1.8-2.1% | 3.2% (inflated figure) |
Services Exports Share | 3.5-4% | Often ignored in calculations |
Global Ranking (Goods) | 17th-19th position | Assumed to be in top 10 |
Total Trade Share | 2.5-3% approx | Confused with individual metrics |
Key Factors
India's services exports perform better than merchandise exports globally
Manufacturing competitiveness remains a challenge compared to East Asian economies
Trade share has been relatively stable around 2% for merchandise exports over recent years
PLI schemes aim to boost this share by enhancing manufacturing capabilities
Trap: Statement I uses 3.2% - this inflated figure is designed to sound plausible but is incorrect
Confusion: Don't mix merchandise trade share with total trade share or services share
Memory Hook: India's goods export share is around 2%, not 3% - remember 'India 2%'
Recent Data: Always use approximate ranges (1.8-2.1%) rather than exact figures that may be outdated
Production Linked Incentive (PLI) Scheme
Indian Economy Production-linked Incentive PLI scheme local companies foreign companies
Production Linked Incentive (PLI) Scheme: Coverage & Impact
PLI scheme is open to both domestic and foreign companies operating in India
Covers 14 key sectors including electronics, pharmaceuticals, automobiles, textiles
Total outlay of ₹1.97 lakh crore over 5 years
Incentives are 4-6% of incremental sales for most sectors
Scheme Overview
PLI scheme provides financial incentives to companies based on their incremental sales and investment in India. Both Indian and foreign companies can participate, making Statement-II correct.
PLI Sectors & Examples
Sector | Indian Company Example | Foreign Company Example | Incentive Rate |
|---|---|---|---|
Mobile Manufacturing | Dixon Technologies | Samsung, Apple (via Foxconn) | 4-6% |
Pharmaceuticals | Cipla, Sun Pharma | Pfizer, GSK | 3-10% |
Automobiles | Bajaj Auto, Tata Motors | Hyundai, Maruti Suzuki | 8-18% |
Textiles | Welspun, Arvind | Uniqlo suppliers | 3-11% |
Solar PV | Adani Solar | Vikram Solar | 4-5% |
Key Features
Eligibility: Minimum investment thresholds vary by sector (₹10-250 crore)
Duration: 5-year incentive period for most sectors
Employment: Expected to create 60 lakh jobs across sectors
Export Focus: Companies must meet specific export targets in many sectors
PLI Scheme Structure
# PLI Scheme Benefits
## For Companies
- Sales-based incentives
- Reduced production costs
- Scale economies
- Export competitiveness
## For Economy
- Manufacturing boost
- Job creation
- Technology transfer
- Import substitution
## Eligibility
- Indian companies
- Foreign companies in India
- Minimum investment criteria
- Performance targetsKey Point: PLI is NOT exclusive to Indian companies - foreign companies operating in India can participate
Success Stories: Samsung and Dixon Technologies are classic PLI beneficiaries UPSC may reference
Confusion: Don't mix PLI with Make in India - PLI is the incentive mechanism, Make in India is the broader campaign
Recent Focus: PLI scheme expansion and success stories are frequently tested in current affairs
UPSC Statement Analysis Strategy
Indian Economy
Mastering UPSC Statement-Based Questions: Analysis Framework
Evaluate each statement independently before checking relationships
Explanation relationship means Statement-II logically causes or explains Statement-I
Both statements can be correct but not causally related
UPSC often makes one statement factually wrong with plausible-sounding data
Analysis Process
%%{init: {"flowchart": {"wrappingWidth": 460}}}%%
flowchart TD
s1["`**Step 1: Verify Statement-I**
Check factual accuracy using your knowledge - ignore Statement-II completely`"]
s2["`**Step 2: Verify Statement-II**
Check factual accuracy independently - ignore any connection to Statement-I`"]
s3["`**Step 3: Eliminate Wrong Statements**
If either statement is factually wrong, eliminate options A, B, C accordingly`"]
s4["`**Step 4: Check Causal Relationship**
If both are correct, ask: Does Statement-II logically explain WHY Statement-I is true?`"]
s1 --> s2
s2 --> s3
s3 --> s4Option Selection Logic
Statement-I Status | Statement-II Status | Relationship | Correct Option |
|---|---|---|---|
✓ Correct | ✓ Correct | II explains I | A |
✓ Correct | ✓ Correct | No causal link | B |
✓ Correct | ✗ Wrong | Not applicable | C |
✗ Wrong | ✓ Correct | Not applicable | D |
✗ Wrong | ✗ Wrong | Not applicable | None (rare) |
This Question Analysis
Statement-I claims India has 3.2% global export share (wrong - actual is ~2%). Statement-II about PLI scheme participation is factually correct. Since I is wrong and II is right, answer is Option D.
Trap: Don't assume relationships exist - UPSC often pairs unrelated but correct statements
Factual Trap: 3.2% sounds reasonable for India's trade share but is deliberately inflated
Logic Trap: Even if both statements were correct, PLI success doesn't directly explain overall export share
Time Management: Verify facts FIRST, then worry about relationships - saves time and reduces errors
India's Manufacturing Competitiveness
Indian Economy
India's Manufacturing Sector: Challenges & Government Initiatives
Manufacturing contributes approximately 17% to India's GDP
PLI scheme targets increasing manufacturing exports and reducing import dependence
India faces competition from China, Vietnam, Bangladesh in labor-intensive manufacturing
Make in India and Atmanirbhar Bharat are key policy frameworks
Context
India's manufacturing competitiveness directly impacts its global trade share. Understanding the policy ecosystem helps explain why schemes like PLI are crucial for export growth.
Manufacturing Initiatives Comparison
Initiative | Launch Year | Focus Area | Key Feature |
|---|---|---|---|
Make in India | 2014 | Overall manufacturing | Ease of business, FDI promotion |
PLI Scheme | 2020 | 14 specific sectors | Sales-linked incentives |
Atmanirbhar Bharat | 2020 | Self-reliance | Import substitution focus |
National Manufacturing Policy | 2011 | Manufacturing share to 25% | Investment promotion, skill development |
Manufacturing Challenges
# Manufacturing Competitiveness Issues
## Infrastructure
- Power supply issues
- Transportation costs
- Port efficiency
- Digital connectivity
## Policy & Regulation
- Labor laws complexity
- Land acquisition
- Environmental clearances
- GST compliance
## Global Competition
- China's scale advantages
- Vietnam's cost benefits
- Bangladesh textiles
- Mexico's proximity to USRecent Developments
China+1 strategy by global companies creating opportunities for India
Electronics manufacturing showing strong growth under PLI - mobile phone exports rising
Automotive sector benefiting from both domestic demand and export potential
Pharmaceutical exports already strong, PLI aims to reduce API import dependence
Don't Confuse: Make in India (broad campaign) vs PLI (specific incentive scheme) vs Atmanirbhar Bharat (self-reliance vision)
Manufacturing vs Services: India's services exports perform much better than manufacturing exports
GDP vs Export Share: Manufacturing's GDP contribution (~17%) is different from its export share
Success Metrics: PLI success should be measured in production increase, not just number of participating companies