Discuss the rationale of the Production Linked Incentive (PLI) scheme. What are its achievements? In what way can the functioning and outcomes of the scheme be improved?

The PLI scheme, launched in 2020, covers 14 key sectors and provides direct incentives on incremental sales of goods manufactured in India. It aims to raise manufacturing’s contribution to 25% of GDP.

Rationale of the PLI Scheme

Boost domestic manufacturing by overcoming the historic 16-17% manufacturing share in GDP.

Reduce import dependence, especially in critical sectors like electronics, APIs, and solar modules.

Integrate India into global value chains (GVCs) by attracting global manufacturers.

Encourage scale, competitiveness, and technology transfer through incentive-based production expansion.

Generate employment in labour-intensive and high-potential sectors.

Promote sunrise industries (EVs, semiconductors, telecom, batteries) to position India in future technologies.

Enhance Exports – Position India as a competitive player in global value chains.

Achievements So Far

achieved by PLI beneficiaries (mid-2025).

Over 12 lakh direct and indirect jobs created.

India became the 2nd-largest mobile producer, with 97% domestically made.

Third-largest pharmaceutical producer globally. 50% of total pharma production is exported.

Automotive Sector – Boosted EV components, hydrogen technologies, and high-tech auto manufacturing.

Achieved 60% import substitution in telecom equipment.

Issues

Falling Manufacturing Share in GDP (from 15.4% to 14.3%) since PLI launch.

>10% of allocated funds disbursed.

Delays in Incentive Disbursement

94% of incentives to pharmaceuticals and mobile-phone manufacturing

Limited Achievement of Targets only 37% of scheme’s goal.

Exclusion of MSMEs due to high eligibility thresholds

Way Forward

Faster disbursal of incentives to reduce uncertainty and improve industry cash flows.

Move from scale-based incentives to design, R&D, and innovation incentives (chips, batteries).

Enhance MSME participation through cluster-based PLI, separate PLI window for MSMEs

Rationalise value-addition norms – realistic localisation targets.

Improve coordination between Centre and States to reduce procedural delays.

Strengthen monitoring, transparency, and impact evaluation through real-time dashboards

Couple PLI with ease-of-doing-business reforms and plug-and-play infrastructure

As PM Modi stated, “Aatmanirbharta is the cornerstone of building a Viksit Bharat.” Strengthening PLI can help realise this objective.