Govt to let $23 bn PLI scheme, launched to rival China in manufacturing, lapse: Report

The Indian government, led by Prime Minister Narendra Modi, has decided to discontinue a major scheme launched four years back to incentivise domestic manufacturing, reported Reuters. The $23 billion Production-Linked Initiative (PLI) scheme was introduced to attract manufacturers abandoning the Chinese market following Covid-19 pandemic.

Reuters quoted two Indian officials as saying that the scheme won’t be expanded beyond 14 pilot sectors and production deadlines will not be extended despite requests from some participating firms. According to public records, more than 700 companies, including Apple supplier Foxconn, had signed up for the PLI scheme to expand their manufacturing base in India.

One of the major objectives behind the scheme was to expand the share of manufacturing in Indian economy to 25 per cent by 2025.

However, following the scheme’s introduction, the share of manufacturing has decreased from 15.4 per cent to 14.3.

Many firms in the programme failed to start production, while others that met manufacturing targets faced delays in receiving subsidies from the government, Reuters reported citing documents.

An undated analysis compiled by India’s commerce ministry revealed that by October 2024, the PLI scheme had achieved only 37 per cent of the target it had set at the time of launching. Firms that signed up for the scheme produced only $151.93 billion worth of goods under the programme.

Nonetheless, the official quoted by Reuters assured that rolling back of the PLI scheme didn’t mean India was abandoning its manufacturing ambitions, adding that alternatives were being explored.

Notably, the Indian government last year defended its PLI scheme, which credited it for massive boost in pharmaceuticals and mobile-phone manufacturing. According to documents seen by Reuters, some 94 per cent of the nearly $620 million in incentives disbursed between April and October 2024 were directed to those two sectors.

Last September, PM Modi lauded the PLI scheme on the 10th anniversary of his government’s ‘Make in India’ initiative, calling it a ‘game changer’.

An Indian official, speaking anonymously due to the sensitivity of the matter, said excessive bureaucracy and red tape were still hindering the scheme’s success.

As an alternative, India is exploring partial reimbursement of investment costs for setting up plants, allowing companies to recover expenses more quickly instead of waiting for production and sales, another official said.

(With inputs from agencies)