The Production Linked Incentive (PLI) Scheme, launched in 2020, is a cornerstone of India’s strategy to transform its manufacturing sector.

In the Union Budget 2025-26, allocations for key PLI sectors were scaled up significantly. For instance, Electronics and IT Hardware saw an increase from ₹5,777 crore to ₹9,000 crore

Rationale of the PLI Scheme

• Self-Reliance: Reduce import dependence in critical sectors by building domestic capacity. For example, India’s heavy reliance on bulk drugs like Penicillin G and electronics imports is being offset by PLI-supported local production, lowering vulnerabilities.

• Boost Manufacturing Capacity: Incentivise firms to expand production and achieve scale. The electronics sector shows this clearly, with domestic mobile output rising from 5.8 crore units (2014-15) to 33 crore units (2023-24), backed by PLI incentives.

• Export Competitiveness: Position India in global value chains by enhancing export potential. Exports of mobile phones alone touched ₹90,000 crore in 2023, reflecting how PLI is making Indian products internationally competitive.

• Investment & Employment: Stimulate FDI inflows and generate large-scale jobs. By 2024, investments worth ₹1.46 lakh crore were realised under PLI, creating nearly 9.5 lakh jobs across electronics, pharma, and auto sectors.

• Innovation & Green Growth: Encourage R&D and align growth with sustainability. For instance, the PLI scheme for ACC battery storage and solar PV modules (₹19,500 crore outlay for 65 GW capacity) is pushing India towards renewable energy leadership and green manufacturing.

Achievements so far

Areas for Improvement

1. Faster disbursal and transparency While investments are flowing in, delayed release of incentives weakens industry confidence. A clear, time-bound online portal for claims would reduce uncertainty and encourage more firms to commit resources.

2. Boosting domestic value addition India’s electronics exports are rising, but local content in mobiles is still around 20–25 percent. Unless incentives are tied to higher value addition, the scheme risks turning India into an assembly hub rather than a true manufacturing base.

3. Addressing sectoral imbalance Electronics and pharma have outperformed, but textiles and white goods lag behind. Recalibrating incentive slabs and aligning product lists with global demand would ensure balanced benefits across sectors.

4. Support for MSMEs High investment thresholds keep smaller firms out. Creating a separate track with lower entry barriers would allow MSMEs to integrate into global supply chains and spread benefits more widely.

5. Encouraging R&D and design Currently, PLI rewards scale but not innovation. Linking a portion of incentives to patents, indigenous design, and technology development would help India move up the value chain and not just compete on low costs.

6. Export competitiveness Export growth is strong in mobiles, but other sectors struggle due to logistics costs and regulatory bottlenecks. Incentives tied to net forex earnings and smoother trade facilitation can broaden India’s export basket under PLI.

To maximise outcomes, greater focus on timely execution, balanced sectoral spread, SME inclusion, and export integration is needed. Done well, PLI can cement India’s rise as a global manufacturing leader and accelerate its path to a $5 trillion economy.