India’s ambitious $23 billion Production-Linked Incentive (PLI) scheme, launched to boost domestic manufacturing and attract firms away from China, will not be expanded or extended after failing to meet its targets, according to Reuters.
The programme, which aimed to increase manufacturing’s share of the economy to 25% by 2025, has instead seen the sector’s contribution decline from 15.4% to 14.3%.
As of October 2024, participating firms produced 151.93 billion worth of goods, achieving only 371.73 billion in incentives—less than 8% of allocated funds—had been disbursed. While pharmaceuticals and mobile-phone manufacturing saw significant growth, other sectors like steel, textiles, and solar panels struggled to meet targets.
Excessive red tape and delays in subsidy payouts also hindered the programme’s effectiveness, despite some deadline extensions and increased payment frequency.
Launched in 2020, the PLI scheme offered cash incentives to companies meeting production targets. Over 750 firms, including Apple supplier Foxconn and Indian conglomerate Reliance Industries, participated. However, many failed to start production, whereas others faced delays in receiving subsidies.
Challenges and criticism
Trade expert Biswajit Dhar described the PLI scheme as “possibly the last chance we had to revive our manufacturing sector,” expressing skepticism about future initiatives. India faced stiff competition from cheaper rivals like China in sectors such as solar panels and textiles. For example, eight of 12 solar companies in the PLI programme are unlikely to meet their targets.
US President Donald Trump’s protectionist policies and threats of reciprocal tariffs further complicated India’s export-driven manufacturing ambitions.
The government defended the programme’s impact in pharmaceuticals and mobile-phone manufacturing, which accounted for 94% of disbursed incentives. However, it acknowledged challenges in other sectors and is considering alternative measures, such as partially reimbursing investments to help firms recover costs faster.
As India seeks to position itself as a global manufacturing hub, addressing bureaucratic inefficiencies and fostering a more competitive environment will be critical to achieving its economic goals.
