India’s government, led by Prime Minister Narendra Modi, has decided to end a $23 billion initiative to boost domestic manufacturing.
Launched four years ago to lure companies from China, the Production-Linked Incentive (PLI) scheme will not expand beyond its 14 pilot sectors, nor will deadlines be extended, four government officials confirmed. This marks a shift in India’s industrial strategy despite participation from giants like Foxconn and Reliance Industries.
The PLI scheme attracted 750 companies with promises of cash rewards for meeting production goals. The target? Elevate manufacturing to 25% of India’s economy by 2025. Yet, as of October 2024, firms produced just $151.93 billion in goods—37% of Delhi’s goal—while the government disbursed only $1.73 billion of the pledged incentives, per a commerce ministry analysis. Manufacturing’s economic share dropped from 15.4% to 14.3% since the program began.
Why the shortfall? Many firms failed to start production, while others met targets but faced payout delays. Excessive bureaucracy and cautious oversight hindered progress, one official noted anonymously. Reuters first reported the decision to let the program lapse, alongside details of the payment lag.
Huge manufacturing failure in India!
The much hyped production-linked incentive (PLI) was an epic failure & will be discontinued after 5 years.
The goal was to increase manufacturing’s share of GDP to 25% by 2025. Reality? Still stuck at 14%.
Of the $23 billion allocated, only… pic.twitter.com/JEkNqD5ZyJ
— S.L. Kanthan (@Kanthan2030) March 22, 2025Hits in Pharma and Mobiles, Misses Elsewhere
The PLI scheme shone in pharmaceuticals and mobile phone manufacturing. Mobile production soared to $49 billion in 2023-24, up 63% from 2020-21, with Apple now crafting cutting-edge models in India. Pharma exports nearly doubled to $27.85 billion over a decade. Together, these sectors claimed 94% of the $620 million in incentives from April to October 2024.
However, success didn’t spread. Progress lagged in steel, textiles, and solar panels. For instance, eight of 12 solar PLI participants—including Reliance and Adani units—may miss targets, a December 2024 renewable energy ministry report warned. Reliance’s solar arm is projected to hit just 50% of its goal by 2027, while Adani and JSW face delays in equipment and action. The commerce ministry rejected deadline extensions, citing fairness.
What’s Next for India’s Manufacturing Push?
Though the PLI ends, two officials stressed that India hasn’t abandoned its manufacturing ambitions. A new approach may reimburse firms for plant setup costs, speeding up returns compared to waiting for production milestones. Still, trade expert Biswajit Dhar warned that this could be India’s last shot at reviving the sector. “If a mega-scheme like this fails, what’s left?” he asked.
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The timing stings. India aimed to capitalize on China’s COVID-era struggles and the U.S.’s pivot from Beijing. With a young workforce and lower costs, it seemed poised to win. However, export challenges mount as U.S. President Donald Trump threatens tariffs over India’s trade surplus.
Red tape plagued the PLI from the start. Some food-sector firms missed subsidies due to unmet investment or growth thresholds despite exceeding production goals. Delhi once adjusted deadlines and payment schedules after complaints, but bottlenecks persisted. Meanwhile, cheaper rivals like China outpaced India in sectors like steel and solar.
The government remains optimistic, touting pharma and mobile gains. Yet, with 14 of 58 steel projects dropped and solar firms faltering, the PLI’s legacy is mixed. Modi’s office and the Commerce Ministry declined to comment.
