India to let $23 billion manufacturing push expire after falling short of goals

India ends $23 billion manufacturing incentive program amid red tape

The Indian government, led by Prime Minister Narendra Modi, has decided to wind down its ambitious $23 billion Production-Linked Incentive (PLI) scheme—just four years after launching it to boost domestic manufacturing and reduce reliance on China. The program, aimed at elevating India’s manufacturing share to 25% of GDP by 2025, will not be expanded beyond the 14 sectors initially targeted, and deadlines for production targets will not be extended, officials confirmed.

Launched in 2020, the PLI scheme offered cash payouts to firms meeting specific production and investment benchmarks. Over 750 companies, including industry giants like Apple supplier Foxconn and Reliance Industries, signed up with the hope of capitalizing on India’s growing manufacturing ecosystem.

However, government data reveals mixed results. As of October 2024, companies had produced goods worth $151.9 billion under the scheme—just 37% of the original target. Only $1.73 billion in incentives, less than 8% of the total allocation, had been disbursed, according to a commerce ministry analysis reviewed by Reuters.

Despite some successful sectors like mobile phones and pharmaceuticals, where nearly 94% of incentives issued between April and October 2024 were directed, the broader manufacturing push faltered. Many firms failed to begin production, while others that hit targets faced delays in receiving payouts. Excessive bureaucracy and cautious red tape stymied the rollout, officials said.

The government has not formally commented on the program’s termination, but two officials said that new policy alternatives are being considered. These could include schemes to partially reimburse plant setup costs, enabling quicker recovery for investors compared to the current model that ties incentives to production.

The PLI’s limited success is particularly concerning amid rising global trade tensions and US President Donald Trump’s threats of reciprocal tariffs on nations like India with trade surpluses. Trade experts suggest that the PLI scheme may have been India’s best opportunity to leap forward in manufacturing amid the global shift away from China.

“This was possibly the last chance to revive our manufacturing sector,” said Biswajit Dhar of the Delhi-based Council for Social Development. “If this kind of mega-scheme fails, do you expect anything else to succeed?”

Pockets of success

India has seen major gains in mobile phone production, which rose to $49 billion in 2023-24, a 63% increase since 2020-21. Apple now manufactures its latest models in India, signifying a shift in global supply chains.

Pharmaceutical exports have also flourished, nearly doubling to $27.85 billion over the last decade.

Missed targets in key sectors

In contrast, other sectors like steel, textiles, and solar panel manufacturing fell short. In the solar sector, a December 2024 government analysis found that 8 of the 12 firms participating—including subsidiaries of Reliance, Adani, and JSW—are unlikely to meet targets. The report noted:

• Reliance: projected to hit only 50% of its production goal by FY2027.
• Adani: had not ordered essential manufacturing equipment.
• JSW: had made no significant progress.

While JSW declined to comment, Adani did not respond to inquiries.

The Commerce Ministry also rejected requests from the Renewable Energy Ministry to extend the solar PLI program beyond 2027, arguing it would reward underperformers unfairly.

In the steel sector, the performance was equally disappointing. Fourteen of the 58 approved projects were either withdrawn or canceled due to lack of progress.

Red tape and missed opportunity

In the food processing sector, companies that exceeded production targets were denied subsidies due to issues like failure to meet investment thresholds or growth criteria, according to the internal analysis.

The government previously made some adjustments to the PLI scheme—extending deadlines and increasing payout frequency—but these changes weren’t enough to salvage widespread success.

As India faces growing economic pressure from global players and the breakdown of long-standing trade norms, the end of the PLI scheme marks a sobering moment. While alternative strategies are being explored, the shelving of such a large-scale initiative raises questions about the country’s ability to deliver on its Make in India ambitions.

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