India’s ambitious $23 billion Production-Linked Incentive (PLI) scheme aimed at boosting domestic manufacturing is set to lapse after just four years. Launched to attract global companies and reduce reliance on Chinese imports, the program will conclude without further extensions or expansions.
Why the Scheme Is Ending
The government introduced the PLI scheme in 2021 to incentivize companies through cash payouts based on their production levels. However, despite significant investments, many companies failed to meet their production targets. As of October 2024, firms produced $151.93 billion worth of goods, just 37% of the initial goal.
Moreover, only $1.73 billion in incentives had been disbursed, representing less than 8% of the allocated funds. Bureaucratic delays and stringent compliance requirements led to frustration among companies, further stalling progress.
Success Stories and Missed Targets
While sectors like mobile phones and pharmaceuticals saw remarkable growth, others lagged. India’s mobile phone production surged by 63% to reach $49 billion in FY24, with global brands like Apple increasing manufacturing in the country. Pharmaceutical exports also nearly doubled, reaching $27.85 billion.
However, industries like solar panels, steel, and textiles struggled. Reports indicated that eight out of twelve solar firms under the scheme, including major players like Reliance and Adani, failed to meet their targets.
Government’s Future Plans
Despite the program’s conclusion, the government remains committed to strengthening domestic manufacturing. Alternatives being considered include investment reimbursements to provide quicker financial support to companies. Unlike PLI, this approach would help companies recover setup costs faster without waiting for production milestones.
The government also aims to simplify regulatory procedures and reduce bureaucratic hurdles to encourage smoother operations for businesses.
Conclusion
While the PLI scheme achieved success in select sectors, its overall impact fell short of expectations. With a renewed focus on targeted financial support and streamlined processes, India seeks to continue its manufacturing growth. Businesses are encouraged to explore upcoming government incentives as the nation remains determined to build a resilient manufacturing ecosystem.
