Contents
Introduction
With manufacturing contributing about 17% to GDP, the Government launched the Production Linked Incentive scheme with ₹1.97 lakh crore outlay to boost domestic manufacturing, as highlighted in Economic Survey 2025–26 and policy discussions of NITI Aayog.
Rationale of the PLI Scheme
- Cost Disability Offset: Indian manufacturers often face higher costs due to logistics, power, and high cost of capital. PLI provides a 4% to 6% incentive on incremental sales to level the playing field against global competitors. Example: Make in India initiative.
- Scale and Global Champions: By linking incentives to production (output) rather than just investment (input), it encourages firms to achieve economies of scale and become global export hubs. Example: smartphone exports growth.
- Import Substitution & Self-Reliance: It targets sectors with high import dependency, such as Bulk Drugs (APIs) and Semiconductors, to ensure national security and supply chain resilience. Example: bulk drug imports.
- Investment catalyst: The scheme attracts both domestic and foreign investors by linking incentives to performance. Example: FDI inflows in electronics. This also promotes technology transfer and advanced manufacturing capabilities.
- Labour-intensive growth: Manufacturing expansion generates large-scale employment. Example: Foxconn Chennai plant. PLI-led industrial clusters are emerging in states such as Tamil Nadu, Gujarat, and Andhra Pradesh.
Achievements of the PLI Scheme
According to the Economic Survey 2025-26 and recent Ministry of Commerce data, the scheme has hit several key milestones:
| Metric | Achievement Status (as of Q1 2026) |
| Realized Investment | Over ₹2.16 lakh crore (exceeding initial targets). |
| Incremental Production/Sales | Surpassed ₹20.41 lakh crore. |
| Employment Generation | Created approximately 14.39 lakh jobs (Direct & Indirect). |
| Export Growth | Exports exceeded ₹8.2 lakh crore, driven by Electronics and Pharma. |
| Flagship Success | India is now the 2nd largest mobile phone manufacturer globally. |
| Pharmaceuticals | India shifted from a net importer to a net exporter of bulk drugs in FY 2024-25, with an 83% domestic value addition. |
| Electronics | Mobile phone production surged tenfold over the last decade, reaching ₹5.5 lakh crore in FY25. |
Areas for Improvement
Despite its successes, the scheme faces implementation hurdles that require recalibration:
- Enhancing Domestic Value Addition: While assembly (e.g., smartphones) has scaled, the core components (semiconductors, displays) are still largely imported. The proposed PLI 2.0 should offer higher incentive slabs for component manufacturing rather than just final assembly.
- Supporting MSMEs: The high investment thresholds of the original scheme often excluded Small and Medium Enterprises. Creating Mini-PLI sub-schemes with lower entry barriers or Cluster-based incentives to integrate MSMEs into the global value chain.
- Administrative and Disbursement Ease: Bureaucratic delays in verifying incremental sales have led to slow incentive payouts in some sectors. Moving to a Digital Claims Settlement system with “Deemed Approval” for verified green-channel companies to improve cash flow.
- Shift to Result-Based Skill Development: The tech-heavy nature of PLI sectors (Advanced Chemistry Cells, Solar PV) requires specialized labor. Aligning PLI incentives with mandatory In-house Training & Skill Certification to ensure the workforce evolves with Industry 4.0.
Conclusion
As emphasised by former President Dr. A.P.J. Abdul Kalam in India 2020, technological strength and manufacturing capability are essential for national prosperity; the PLI scheme represents a decisive step toward that vision.
