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India’s $23 Billion PLI Scheme Set to Expire After Poor Output
India’s high-stakes $23 billion Production-Linked Incentive (PLI) scheme, introduced in 2020 to boost domestic manufacturing and rival China’s industrial dominance, is set to lapse after delivering disappointing results. The scheme, which was launched with the vision of turning India into a global manufacturing hub, has only achieved a fraction of its expected impact.
PLI Scheme Fails to Meet Expectations
The initiative, which spanned 14 sectors and was central to the ‘Make in India’ campaign, has seen only 37% of its targeted production realized as of October 2024. The government had aimed to elevate the manufacturing sector’s share of the economy to 25% by 2025. Instead, that figure has dropped from 15.4% to 14.3%, signaling a concerning trend.
While some gains were recorded in mobile phone and pharmaceutical manufacturing, several key sectors like textiles, steel, and solar energy failed to meet benchmarks. The lackluster outcome has cast a shadow on one of India’s most ambitious industrial policy pushes in recent years.
Delays and Bureaucratic Bottlenecks
Many companies that participated in the PLI scheme have voiced concerns over delays in disbursement of subsidies, despite meeting production targets. Others pointed to bureaucratic red tape and rigid guidelines that stifled faster implementation. Only about $1.73 billion of the allocated incentives had been disbursed by late 2024, barely 8% of the total fund.
Rethinking the Approach to Domestic Manufacturing
In response to the PLI scheme’s underperformance, the government is considering a shift in strategy. New proposals being evaluated include partially reimbursing capital investments to accelerate industrial project launches. This approach aims to support companies in the early stages of setting up operations, making it financially viable to invest in domestic manufacturing without waiting for post-production incentives.
Policy Implications and Way Forward
The expiry of the PLI scheme underscores the challenges India faces in scaling up its manufacturing sector. While the intent was to reduce import dependency and promote exports, the limited success of this scheme reveals that deeper structural reforms and more adaptive policies may be necessary.
As India reassesses its industrial strategy, the experience with the PLI scheme will likely serve as a key reference point in shaping future efforts aimed at revitalizing domestic production and attracting large-scale investments.
