The Indian government has decided to let its ambitious $23 billion Production-Linked Incentive (PLI) scheme lapse, just four years after its launch. The program, aimed at boosting domestic manufacturing and reducing reliance on China, will not be extended beyond the 14 pilot sectors, according to government officials.
Background and Objectives
Launched in 2020, the PLI scheme was designed to attract global firms, increase manufacturing’s share in India’s GDP to 25% by 2025, and provide cash incentives to companies meeting production targets. The initiative initially attracted 750 companies, including major players like Foxconn and Reliance Industries.
Challenges and Underperformance
Despite its ambitious goals, the scheme fell short of expectations. As of October 2024, participating firms had produced $151.93 billion worth of goods—just 37% of the target. Additionally, only $1.73 billion in incentives, or under 8% of the allocated funds, were disbursed. Bureaucratic delays and regulatory hurdles further hampered the program’s effectiveness.
While sectors like mobile-phone manufacturing and pharmaceuticals saw significant growth, others, including steel, textiles, and solar panels, struggled to meet targets. For instance, eight of the 12 solar companies failed to achieve their goals, and 14 of the 58 approved steel projects were withdrawn due to lack of progress.
Government’s Response
Officials have clarified that the decision to end the PLI scheme does not signal a retreat from manufacturing ambitions. Alternative measures, such as partially reimbursing companies for setting up factories, are being considered to support the sector. The government has also defended the program’s impact on specific industries, highlighting the explosive growth in mobile manufacturing and pharmaceutical exports.
Future Outlook
The lapse of the PLI scheme raises questions about India’s ability to compete with global manufacturing hubs like China. Experts have called for more streamlined policies and reduced red tape to ensure the success of future initiatives. As the government explores alternative strategies, the focus remains on sustaining manufacturing growth and addressing domestic inefficiencies.
Stay tuned for updates on this developing story and its implications for India’s manufacturing sector.
