Due to underperformance, India plans to halt its $23 billion PLI scheme, which failed to meet manufacturing goals, despite success in sectors like mobile phones.
India has reportedly decided not to extend its $23 billion Production-Linked Incentive (PLI) scheme, aimed at boosting domestic manufacturing, just four years after its launch. The programme, designed to attract firms away from China, will end without expansion beyond the 14 initial sectors, despite requests from some companies for more time.
According to an exclusive report by Reuters, the PLI scheme, which offered cash incentives to firms that met production targets, attracted participation from around 750 companies, including Foxconn and Reliance Industries. However, it struggled to achieve its goal of increasing manufacturing’s contribution to India’s economy.
As of October 2024, the scheme had achieved just 37% of its target, with firms producing $151.93 billion worth of goods, while only $1.73 billion in incentives had been paid out.
While specific sectors, notably pharmaceuticals and mobile phone production, saw success, other areas such as steel, textiles, and solar panels lagged behind. The solar industry, in particular, struggled, with many companies failing to meet targets due to slow investment and production.
As per the report, India’s hopes of establishing itself as a major global manufacturing hub faced stiff competition from lower-cost rivals like China.
The government has acknowledged challenges with red tape and slow subsidy payments, which hindered the effectiveness of the scheme. Alternatives, such as reimbursing investment costs for plant setups, are now being considered.
Despite the programme’s underperformance, India continues to prioritise manufacturing growth, focusing on sectors that have shown strong potential, such as pharmaceuticals and mobile phones.
India’s manufacturing share of GDP has decreased from 15.4 per cent to 14.3 per cent, raising concerns about the country’s ability to attract foreign investment and compete in global markets.
Trade experts warn that India may have missed a critical opportunity to revitalise its manufacturing sector.
