India’s economic trajectory is increasingly focused on strengthening its manufacturing base, deemed essential for achieving self-reliance and enhancing its position in global supply chains. The Production Linked Incentive (PLI) scheme, launched in 2020, represents the current government’s flagship industrial policy intervention towards this end. Characterised by its performance-linked structure, offering financial incentives tied to incremental sales from products manufactured in India, the PLI aims to catalyse investment, technological adoption, and scale across identified strategic sectors, thereby seeking to redefine India’s role in global production networks amidst shifting geopolitical and economic landscapes.
Objectives and Scope
The stated strategic objectives of the PLI scheme are multi-faceted: attracting significant domestic and foreign investment, boosting exports while simultaneously reducing import dependence, fostering large-scale job creation, facilitating technology transfer, and ultimately building world-class manufacturing capabilities within the country. By specifically targeting sectors identified as having high growth potential and strategic importance – including electronics, pharmaceuticals, automobiles, textiles, food processing, renewable energy equipment, among others – the policy seeks to accelerate industrial growth and position India as a competitive global manufacturing hub.
The scheme encompasses 14 key sectors with a substantial total financial outlay of ₹1.97 lakh crore (equivalent to over US$26 billion). The selection of these sectors is strategically aligned with the national goal of boosting domestic production and integrating India more deeply into global value chains, consistent with the broader ‘Atmanirbhar Bharat’ initiative.
Initial Outcomes and Data Analysis
In the initial phase of implementation, the PLI scheme has begun to demonstrate tangible, albeit varied, results across sectors. As of August 2024, actual investments attracted stand at approximately ₹1.46 lakh crore. While significant, this figure represents a portion of the total allocated outlay, though projections from official sources suggest it could exceed ₹2 lakh crore relatively soon. These investments are linked to an aggregated production and sales value of around ₹12.50 lakh crore. The scheme is credited with creating an estimated 9.5 lakh direct and indirect jobs so far, with the potential to increase to 12 lakh as investments mature. Exports, particularly from electronics, pharmaceuticals, and food processing sectors, have notably crossed the ₹4 lakh crore mark.
The increase in domestic value addition in mobile phone manufacturing to 20% in three years is frequently cited as a prime example of the scheme’s potential impact on integration into value chains, a pace of progress that reportedly took other nations like Vietnam longer to achieve. Recent budget revisions for 2025-26, showing notably increased allocations for key sectors like electronics (from ₹5,777 cr RE 2024-25 to ₹9,000 cr), automobiles (from ₹346.87 cr to ₹2,818.85 cr), and textiles (from ₹45 cr to ₹1,148 cr), underscore the government’s continued emphasis and scaling up of financial support for these priority sectors.
FDI as a Supporting Pillar:
Complementing the PLI framework, significant liberalisation of India’s Foreign Direct Investment (FDI) policy has been a key enabler. The move to allow 100% FDI under the automatic route in most manufacturing sectors has significantly eased entry barriers for international investors. Policy reforms between 2019 and 2024 across sectors like coal, contract manufacturing, insurance, telecom, and space further signal a broader thrust towards creating an open investment environment. This concerted policy push appears reflected in the manufacturing sector’s FDI equity inflows, which rose substantially from US98 billion between 2004-2014 to US165 billion in the decade spanning 2014-2024, representing a 69% increase. An investor-friendly policy landscape, coupled with streamlined approval processes, is intended to bolster India’s credentials as a leading global manufacturing destination.
*Sectoral Performance and
Highlights:
The impact of the PLI scheme has varied across sectors, with some registering more rapid progress and demonstrating greater alignment with policy objectives than others.
* Electronics (Mobile Phones): This is often presented as the scheme’s major success story, transitioning India from a net importer to a net exporter of mobile phones by volume. Production volume has grown significantly, supported by a substantial increase in FDI (254%). However, analysts point out that the depth of manufacturing (moving beyond assembly to component manufacturing) and the reliance on imported components remain critical areas for achieving true self-reliance in the long term.
* Pharmaceuticals & Medical Devices: India retains its strong position as a global player by volume (third largest). The PLI supports efforts to reduce import dependence on key Active Pharmaceutical Ingredients (APIs) and encourages local production of advanced medical equipment through technology transfer, aiming to move up the value chain from generics to complex manufacturing.
* Automotive: The scheme, with its specific outlay, has successfully attracted investments exceeding its initial target (₹67,690 cr vs ₹20,750 cr outlay), primarily directed towards advanced automotive components and vehicles, indicating a potential for modernising the auto manufacturing ecosystem towards future mobility.
* Renewable Energy (Solar PV): The focus here is on building domestic manufacturing capacity for solar modules and cells (65 GW target in Phase 2). This is critical for meeting India’s ambitious renewable energy targets and reducing dependence on imports, particularly from dominant global players.
* Telecom: The scheme has reportedly facilitated significant import substitution (60%) and positioned India as an emerging exporter of 4G/5G equipment, attracting global players to set up local manufacturing bases. This strengthens domestic telecom infrastructure and enhances participation in global supply chains.
* Drones: Driven largely by startups and smaller players, this nascent sector has seen remarkable growth in turnover (sevenfold). This demonstrates the scheme’s potential to catalyse emerging technologies and attract targeted investment and job creation in niche areas.
The Road Ahead: Challenges and Opportunities:
Despite the promising initial outcomes, the long-term efficacy and sustainability of the PLI scheme depend critically on addressing several significant challenges. Expediting and ensuring greater transparency and predictability in incentive disbursement remains a concern frequently voiced by participating industries. A more fundamental challenge lies in ensuring the scheme’s benefits permeate down to the Micro, Small, and Medium Enterprises (MSMEs), which constitute the vast majority of India’s industrial base and employment but often lack the scale or resources to fully leverage a scheme potentially designed more favourably for larger players.
Guaranteeing stringent quality standards for ‘Made in India’ products is paramount for building global trust and establishing a distinct brand identity beyond cost competitiveness. Perhaps most critically, there is a pressing need to shift focus from merely incentivising assembly and incremental production to fostering deeper domestic value addition and substantially boosting investment in Research and Development (R&D). This is essential for India to move up the technology curve, reduce reliance on imported components and know-how, and build genuinely innovative capabilities. Developing a clear exit strategy or a robust plan for industries to remain competitive without perpetual reliance on subsidies after the scheme period concludes is crucial for ensuring sustainability and avoiding potential market distortions or cliffs.
Future Outlook and Broader Goals:
Looking ahead, the government has signalled its intent to deepen domestic value addition across sectors and potentially expand PLI coverage to future technologies like Electric Vehicle batteries, green hydrogen, and semiconductors, recognising their strategic importance for future economic competitiveness and energy security. The stated aspiration of the Ministry of Commerce and Industry is to generate an additional ₹20 lakh crore in manufacturing output and create 40 lakh jobs over the next five years through PLI schemes, highlighting the scale of ambition and the expected multiplier effect. Strengthening India’s resilience and integration into global supply chains remains a central tenet of this industrial policy push.
While the PLI framework has undoubtedly served as a potent policy tool to inject momentum into India’s manufacturing sector, attracting investment and boosting production, its ultimate success will be measured not just by immediate numbers but by its ability to foster sustainable, competitive, and deeply integrated domestic industries that can thrive independently in the global market over the long term.
Vision of an ‘Atmanirbhar Bharat’
In conclusion, the PLI scheme marks a significant policy shift aimed at revitalising India’s manufacturing sector by offering targeted, performance-based incentives. It is a strategic investment designed to leverage India’s potential and capitalise on changing global dynamics. While initial results are encouraging, particularly in attracting investment and boosting production in select sectors like electronics, its long-term success hinges on effectively addressing implementation bottlenecks, ensuring broader inclusion and benefit for MSMEs, promoting deep indigenisation and R&D, and fostering a genuinely competitive ecosystem that is not perpetually reliant on state support. If these critical challenges are navigated effectively through continuous monitoring and adaptive policy responses, the PLI scheme has the potential to be a true catalyst for India’s manufacturing renaissance and a foundational pillar for realising the vision of an ‘Atmanirbhar Bharat’ capable of competing robustly and sustainably on the global stage.
