India’s $23 Billion Manufacturing Initiative Ends: What’s Next for Domestic Production?

• 21 March 25

India’s $23 Billion Manufacturing Initiative Ends: What’s Next for Domestic Production?

The Indian government has officially ended the $23 billion Production-Linked Incentive (PLI) scheme, a flagship initiative designed to boost domestic manufacturing and reduce dependence on imports, particularly from China. The program, which launched in 2020, aimed to encourage companies to manufacture in India by offering financial incentives tied to production targets. However, by October 2024, only 37% of the total production targets had been achieved, leading to the decision not to extend the scheme further.

Why Was the PLI Scheme Introduced?

The PLI scheme was introduced to:

• Strengthen India’s manufacturing capabilities and position the country as a global production hub.
• Reduce reliance on imports, particularly from China, across key industries.
• Create new employment opportunities and attract foreign investments.
• Boost exports and improve India’s global trade competitiveness.

Sector-Wise Performance of PLI

While some industries benefited from the scheme, others failed to meet expectations.

Sectors That Showed Growth

✔️ Pharmaceuticals – The scheme helped domestic drug production and reduced dependency on imported raw materials.
✔️ Mobile & Electronics Manufacturing – Companies like Apple and Samsung increased local production, driving India’s rise as a smartphone manufacturing hub.
✔️ Semiconductors & Telecom – Government incentives helped attract investments in chip manufacturing and telecom equipment.

Sectors That Struggled

❌ Steel & Textiles – These industries faced difficulties in achieving cost efficiency and scaling production.
❌ Renewable Energy Equipment – Despite initial interest, challenges like high capital costs and supply chain issues slowed growth.
❌ Automobile & EVs – Many companies faced delays in investments and supply chain disruptions, impacting production targets.

Why Was the PLI Scheme Discontinued?

1. Low Target Achievement – By October 2024, only 37% of the expected production targets were met, indicating lower-than-expected industry participation.
2. Underutilization of Funds – A significant portion of the allocated $23 billion budget remained unutilized, raising concerns about the scheme’s effectiveness.
3. Implementation Challenges – Many industries struggled with bureaucratic delays, policy uncertainties, and infrastructure bottlenecks.
4. Global Supply Chain Issues – The COVID-19 pandemic, inflation, and geopolitical tensions disrupted supply chains, impacting production timelines.

What’s Next for India’s Manufacturing Sector?

With the PLI scheme now concluded, the government is exploring alternative strategies to support manufacturing, including:

• New Incentives & Policy Reforms – Alternative subsidies, tax benefits, and trade policies to encourage local production.
• Infrastructure & Logistics Improvements – Investments in industrial corridors, ports, and digital infrastructure to reduce production costs.
• Focus on Emerging Sectors – Targeted support for green energy, electric vehicles, and advanced manufacturing industries.
• Encouraging Foreign Direct Investment (FDI) – Simplified regulations to attract global manufacturers to set up operations in India.

Final Thoughts

While the PLI scheme played a key role in strengthening India’s manufacturing capabilities, its discontinuation signals a shift in the government’s approach to industrial growth. Businesses should closely monitor new policy developments and prepare for evolving opportunities in India’s manufacturing sector.