The government is reportedly set to let its ambitious $23 billion domestic manufacturing incentive program lapse, just four years after its launch, according to a Reuters report. The Production-Linked Incentive (PLI) scheme, introduced in 2020, aimed to transform India into a global manufacturing powerhouse by attracting companies away from China and boosting local production across 14 key sectors, including electronics, pharmaceuticals, and food processing. However, despite the program’s scale and promise, it will not be extended, and production deadlines will remain unchanged, even though several companies sought more time to meet targets, as per four government officials cited in the report.
The PLI scheme was envisioned as a game-changer to elevate manufacturing’s contribution to India’s GDP from 15.4% to 25% by 2025, creating millions of jobs and positioning the country as a viable alternative to China for global supply chains. It offered lucrative cash incentives to companies achieving production and investment targets, drawing major global players like Apple supplier Foxconn and Indian industrial giants such as Reliance Industries.
However, the reality fell short of expectations. Many firms struggled to initiate production or faced significant delays in receiving promised incentives. Government data reviewed by Reuters revealed that by October 2024, companies under the scheme had produced goods worth $151.93 billion — barely 37% of the original target. Meanwhile, only $1.73 billion in incentives had been disbursed, less than 8% of the allocated funds, highlighting major bottlenecks and inefficiencies in the scheme’s execution.
The decision not to extend the program comes as a surprise to many, especially considering the government’s repeated emphasis on turning India into a manufacturing hub. Two senior government officials told Reuters that this doesn’t signal the end of India’s manufacturing ambitions. Instead, policymakers are reportedly considering a revamped approach that may involve partially reimbursing investment costs to help companies recoup their expenses faster — a more flexible, investor-friendly alternative to the rigid performance-based incentives under the PLI scheme.
One official attributed the program’s underperformance to bureaucratic red tape and cumbersome compliance processes that slowed implementation. According to a government analysis cited in the report, some food-processing companies missed out on incentives due to failure to meet stringent investment thresholds and minimum growth criteria.
Despite the setbacks, the PLI scheme has driven notable successes in specific sectors. Mobile phone production emerged as a major bright spot, hitting $49 billion in the 2023-24 financial year — a staggering 63% jump from 2020-21. Similarly, pharmaceutical exports nearly doubled to $27.85 billion compared to a decade ago, reinforcing India’s growing strength in essential sectors.
The expiration of the current PLI scheme underscores the challenges of large-scale industrial policy implementation in India. Still, the government’s apparent willingness to rethink its strategy hints at a more adaptive, results-oriented approach in the future. Whether this new approach can sustain momentum, attract foreign investors, and achieve the long-term vision of making India a global manufacturing leader remains to be seen.
