UPSC Prelims 2023 Q88: India's Export Share and PLI Scheme — Explained

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?

  1. Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I
  2. Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I
  3. Statement-I is correct but Statement-II is incorrect
  4. Statement-I is incorrect but Statement-II is correct

Answer: (d) Statement-I is incorrect but Statement-II is correct

Statement-wise explanation

  • Statement-I: incorrect — India's share of world merchandise (goods) exports is about 1.8%, not 3.2%. WTO data put India's 2022 goods exports at about US$453 billion, roughly 1.8% of the world total, ranked 18th. The Economic Survey 2025-26 says this share rose only from about 1% in 2005 to 1.8% in 2024. A 3.2% share would put India among the top ten goods exporters, and it is not there.
  • Statement-II: correct — The Production Linked Incentive (PLI) schemes cover 14 sectors with a total outlay of ₹1.97 lakh crore. By December 2022, 717 applicants had been approved. They include Indian firms and Indian subsidiaries of foreign companies, such as global phone makers and their contract manufacturers in mobile phones, and foreign-owned firms in textiles. Statement-II cannot explain Statement-I, because Statement-I is false.

How to eliminate

The statement-type options shrink to one question: is each statement true or false? Statement-II is easy to accept from basic current affairs. PLI is open to any company that manufactures in India, so foreign firms with Indian units can use it. That leaves only the options where Statement-II is correct. To choose between them you must judge Statement-I, and that needs one number: India's share of world goods exports is about 1.8%, under 2%. One check helps. India's goods exports are roughly US$450 billion, and world goods exports are roughly US$25 trillion. That works out to under 2%, so 3.2% is far too high. Also watch the wording. 3.2% sounds close to India's share of world GDP in dollar terms, about 3.3–3.5%, or to its share of services exports, which is much higher. UPSC often swaps one share for another like this. Memorise these figures: goods exports about 1.8%, services exports about 4–4.5%, world GDP about 3.5%.

Know more

India in world trade: goods vs services

India's goods trade is small for the size of its economy. Its services trade is large. That gap is why the government launched the PLI schemes.

Indicator Approximate level
Share of world merchandise exports ~1.8% (2022–2024; was ~1% in 2005)
Rank in merchandise exports (WTO, 2022) ~18th
Services exports Much larger share, led by IT and business services; record US$387.6 bn in the latest Economic Survey
Target ~10% of world goods exports by 2047 (WTO Trade Policy Review of India)

Production Linked Incentive (PLI)

  • What it is: a cash incentive, usually 4–6% of incremental sales over a base year, paid for 5 years to firms that meet investment and output thresholds.
  • Evolution: first approved in 2020 for mobiles, key pharma inputs (KSMs/APIs) and medical devices. In November 2020 the Cabinet extended it to 10 more sectors. It now covers 14 sectors with an outlay of ₹1.97 lakh crore.
  • The 14 sectors: mobiles and electronic components, KSMs/APIs, medical devices, automobiles and auto components, pharmaceuticals, specialty steel, telecom and networking, IT hardware, white goods (ACs, LEDs), food products, textiles (MMF and technical), solar PV modules, ACC batteries, drones.
  • Who benefits: any firm making goods in India, Indian or foreign-owned. Foreign firms join through their Indian subsidiaries.
  • Progress: 717 applicants approved by December 2022. Actual investment of about ₹62,500 crore by March 2023.
  • Related tool: the Design Linked Incentive (DLI) rewards chip design spending, not output.

The idea behind PLI is to use scale economies to make Indian factories cost-competitive. Exports should rise as a result. The incentive is paid on output, not on exports.

In the news

In 2022–23, PLI was in the news constantly: approvals across all 14 sectors, Apple suppliers expanding iPhone assembly in India, and record exports in FY 2022-23. Debate about India's small share of world goods trade made it natural to pair the two.

NCERT Concepts to Revise

  • Production-linked incentive: Statement-II turns on who can claim a Production-Linked Incentive and whether foreign-owned firms in India qualify.
  • Composition of India's exports: Statement-I concerns goods only; knowing India's export mix shows why the goods share differs from the services share.
  • International trade: The statement measures India's share of world trade in goods, so you need to know what international trade covers.
  • Design-linked incentive: DLI is PLI's sister scheme; telling them apart avoids confusion in incentive-scheme questions.

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