Blitz Bureau
Ambitious PLI scheme set to lapse due to failure on many fronts
The $23 billion scheme to boost manufacturing in India, and make the country “atmanirbhar” in key industry sectors, which was started by Prime Minister Narendra Modi Government, has run its course. According to a report by Reuters, the Government has decided not to expand the scheme to incentivise domestic manufacturing, just four years after it was launched to woo firms away from China, according to four Government officials.
The scheme will not be expanded beyond the 14 pilot sectors and production deadlines will not be extended despite requests from some participating firms, two of the officials said.
Some 750 companies, including Apple supplier Foxconn and Reliance Industries, signed up to the scheme, public records show.
Firms were promised cash payouts if they met individual production targets and deadlines. The hope was to raise the share of manufacturing in the economy to 25 per cent by 2025.
Instead, many firms that participated in the programme failed to kickstart production, while others that met manufacturing targets found India slow to pay out subsidies, according to Government documents and correspondence seen by Reuters.
As of October 2024, participating firms had produced $151.93 billion worth of goods under the programme, or 37 per cent of the target that Delhi had set, according to an undated analysis of the programme compiled by the Commerce Ministry. India had issued just $1.73 billion in incentives – or under 8 per cent of the allocated funds, the document said.
News of the Government’s decision to not extend the plan and specifics about the lag in payouts have been reported by Reuters for the first time.
The Prime Minister’s office and the Commerce Ministry, which oversees the programme, did not respond to requests for comment. Since the plan’s introduction, manufacturing’s share of the economy has decreased from 15.4 per cent to 14.3 per cent.
Foxconn, which now employs thousands of contract workers in India, and Reliance did not return requests for comment.
Two of the Government officials told Reuters the end of the programme did not mean Delhi had abandoned its manufacturing ambitions and that alternatives were being planned.
The Government last year defended the programme’s impact, particularly in pharmaceuticals and mobile-phone manufacturing, which have seen explosive growth. Some 94 per cent of the nearly $620 million in incentives disbursed between April and October 2024 were directed to those two sectors.
In some instances, some food-sector companies that applied for subsidies weren’t issued them due to factors such as “non compliance of investment thresholds” and companies “not achieving stipulated minimum growth,” according to the analysis. The document did not provide specifics, though it found production in the sector had exceeded targets. Reuters could not determine which companies the analysis referred to.
But Delhi had previously acknowledged problems and agreed to extend some deadlines and increase payment frequency after complaints from PLI participants. One of the officials, who spoke on condition of anonymity to discuss confidential matters, said that excessive red tape and bureaucratic caution continued to stymie the scheme’s effectiveness.
As an alternative, India is considering supporting certain sectors by partially reimbursing investments made to set up plants, which would allow firms to recover costs faster than having to wait for production and sale, another official said.
Trade expert Biswajit Dhar at the Delhi-based Council for Social Development think-tank, who has said the Modi Government needs to do more to attract foreign investment, said the country might have missed its moment.
The incentives programme was “possibly the last chance we had to revive our manufacturing sector,” he said. “If this kind of mega-scheme fails, do you have any expectation that anything is going to succeed?”
The stalling of manufacturing comes as India tries to circumvent the trade war unleashed by US President Donald Trump, who has criticised Delhi’s protectionist policies.
