6 years on, PLI schemes disbursal 18.5% of total outlay: NITI Aayog

Why in the News

Six years after 14 Production Linked Incentive (PLI) schemes were notified, only 18.51% of their Rs 1.91 lakh crore outlay has actually been paid out as incentives. An impact assessment by the NITI Aayog and the Indian Institute of Management (IIM) Ahmedabad finds that nine schemes have disbursed less than a tenth of their outlay. The report credits the scheme’s performance linked design, but critics question how much real manufacturing it has built.

What is the PLI scheme, and why is disbursal slow?

1. What it is: A PLI scheme pays manufacturers a cash incentive only after they meet set targets for investment, production and other criteria. It works like a sales bonus paid after the target is hit.
2. Sectors covered: The 14 schemes notified in 2020 cover sectors such as pharmaceuticals, textiles, automobiles, steel and electronics.
3. Back loaded by design: Incentives are paid only after firms hit their targets, never in advance, and some schemes started later than 2020. Disbursals should rise as firms expand capacity and meet progressively higher thresholds.
4. The takeaway: A low payout can mean firms have not yet hit their targets, so disbursal alone does not show whether the scheme works.

Which schemes have paid out, and which have lagged?

1. Top performers: Drones and drone components have disbursed 77.50% of outlay and large scale electronics manufacturing 55.83%. Both are also top performing export sectors.
2. Middle group: Pharmaceutical drugs have reached 44.39% and food products 24.89%.
3. Nine laggards: Nine schemes, including bulk drugs, automobiles and textiles, have disbursed under 10% of their outlays.
4. Lowest payouts: Bulk drugs (key starting materials, drug intermediaries and active pharmaceutical ingredients) stand at 1.27% and IT hardware 2.0 at 0.57%.

What has the scheme delivered so far?

1. Investment: By March 2026 the schemes had attracted Rs 2.40 lakh crore of investment.
2. Output: The schemes have generated production worth Rs 22.66 lakh crore.
3. Jobs: The schemes have created employment for over 8.49 lakh people.
4. Segments on track: Nearly 70% of targeted segments are broadly on track, with the strongest outcomes in electronics, telecom and pharmaceutical drugs.

Is the PLI scheme building lasting manufacturing?

1. Import surge: Critics say the electronics scheme, considered a success, has also caused a sharp surge in imports.
2. Assembly, not depth: The rise in mobile phone manufacturing is largely assembly of imported parts and adds little to employment.
3. Supply push design: In its current form the scheme is largely “supply driven“, rewarding firms for producing more. Long term sustainability also needs demand side support, which raises buyers’ demand for what firms make.

Challenges

1. Uneven sector response: Sectors differ in how fast they adopt technology, how long projects take to start producing, global competition and capital needs, so one uniform design fits some poorly.
2. Inconsistent data: Ministries collect revenue and employment data in different ways, so outcomes cannot be compared reliably.
3. Fiscal cost back loaded: Because payment follows performance, the bulk of the government’s spending on the schemes falls in their later years, when budgets must absorb it.

Way Forward

1. Sector specific design: Shape each future scheme around its sector’s constraints instead of one uniform approach.
2. Demand pull: Add demand pull mechanisms alongside supply side incentives in the next generation of such schemes.
3. Standard data: Standardise revenue and employment data collection across ministries urgently.
4. Long term review: Shift assessment from the scheme’s initial success to strengthening its long-term effectiveness.

Conclusion

The PLI schemes have drawn investment and production, but slow and uneven payouts show how differently sectors have responded. Whether the next generation of schemes adds demand pull and sector specific design is the thing to watch.

Key numbers

1. Telecom and networking products: 22.59% of outlay disbursed (NITI Aayog, data till March 2026).
2. White goods (ACs and LED) and automobiles: 9.29% and 9.20% disbursed.
3. Speciality steel and textiles (MMF and technical textiles): 3.73% and 3.61% disbursed.
4. ACC battery and high efficiency solar PV modules: Listed in the report’s chart with no disbursal figure.

Matching Previous Year Question

“[2025, GS3, 15 marks] 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?”