Type: Schemes

Why in the News

Twelve years after the Make in India campaign was launched on 25 September 2014, an assessment across 12 metrics covering growth, investment, employment and exports shows the manufacturing sector has not materially raised its share in India’s economic growth, employment or global exports. The campaign’s later incentive schemes have produced some results. Those gains sit in a handful of sectors rather than across manufacturing as a whole. The contested point is whether the shortfall reflects too few incentives or a failure of private investment to broaden beyond the sectors an incentive already reaches.

What is Make in India?

1. Launch and objective: Make in India is a Union government campaign launched on 25 September 2014 to raise the manufacturing sector’s share in India’s economic growth, employment and exports.
2. How performance is judged: Its record is read off 12 metrics spanning growth, investment, employment and exports, rather than off a single headline target.
3. Two statistical series: The output figures exist in an old series and a new series of both the national accounts and the Index of Industrial Production (IIP). A 12 year comparison therefore runs across both.

Has the manufacturing sector actually gained ground in the economy?

1. Growth against the whole economy: Manufacturing grew faster than the overall economy in only half of the 12 years under consideration on the old series.
2. The new series reading: On the new series manufacturing outpaced overall growth in all three years for which data exists, from the 2023 to 2024 financial year through the 2025 to 2026 financial year. That gap is shrinking fast.
3. Industrial production: Within the IIP, manufacturing outpaced the overall index in only three of the 12 years on the old series of that index.
4. The new IIP series: Manufacturing growth matched the overall index in the 2023 to 2024 financial year and was slower in each of the next two years.
5. Share of output, old series: Gross Value Added (GVA) data on the older series shows manufacturing’s share in overall GVA is lower in the 2025 to 2026 financial year than it was when the campaign was launched in 2014.
6. Share of output, new series: The new series shows the sector’s share rising marginally, from 14.6 per cent in the 2022 to 2023 financial year to 15.6 per cent in the 2025 to 2026 financial year.

What do the export numbers actually show?

1. Growth since the launch: Non petroleum goods exports grew 53 per cent to $388.3 billion in the 2025 to 2026 financial year, from $253.5 billion in the year the campaign was launched.
2. The preceding 12 years: The same exports grew more than 400 per cent over the 12 years before the launch, on a much smaller base.
3. Base effect is only part of it: The smaller starting base accounts for only some of the difference between the two periods.
4. Share of world trade: United Nations Conference on Trade and Development (UNCTAD) data shows India’s share in global merchandise exports rose from around 0.8 per cent in 2002 to 1.7 per cent in 2013. It has remained at 1.7 per cent in the 2025 to 2026 financial year.

Is private investment backing the manufacturing push?

1. Private capital formation: Gross fixed capital formation (GFCF) by the private sector, meaning its spending on real asset creation, formed a lower share of gross domestic product (GDP) in the 2023 to 2024 financial year, the latest on the old series, than it did in the 2014 to 2015 financial year.
2. The new series trend: On the new series GFCF as a percentage of GDP has been falling since the 2022 to 2023 financial year.
3. Foreign investment into factories: Foreign direct investment (FDI) into manufacturing grew slower than overall FDI in 7 of the 12 years. Its share in overall FDI rose from nearly 48 per cent in the 2014 to 2015 financial year to 55 per cent in the 2025 to 2026 financial year.
4. Capacity utilisation: Reserve Bank of India (RBI) data on how intensively factories are being used shows the metric rising slowly over recent years. It remains below the 80 per cent mark treated as the level above which companies invest in fresh capacity.
5. Credit without output: Bank credit to industry has grown strongly, led by credit to micro, small and medium enterprises. In the absence of sustained rapid growth in output, this points to borrowing for working capital rather than for new investment.

How concentrated are the incentive gains?

1. Scale of the schemes: The 14 Production Linked Incentive (PLI) schemes, launched across 2020 and 2021, have drawn a cumulative investment of Rs 2.4 lakh crore as of March 2026.
2. Concentration in five sectors: Solar modules, pharmaceutical drugs, automobiles and their components, specialty steel and large scale electronics manufacturing together account for nearly 83 per cent of all investment under the schemes.
3. Everything else in the schemes: The remaining covered sectors share a little over one sixth of the investment between them.

Challenges to Make in India

1. Tariff protection raises input costs: Duties placed on intermediate goods raise the cost of inputs for the assembly the same policy is trying to attract. Eg. The Phased Manufacturing Programme for mobile phones raised duties on imported components such as chargers and printed circuit board assemblies.
   The Fix: Hold intermediate inputs at low duty rates and apply protection only at the final assembly stage.
2. Incentive design favours large incumbents: A subsidy paid on incremental sales above a threshold can only be claimed by firms already operating at scale. Eg. Under the PLI scheme for large scale electronics manufacturing, most approved incentive has flowed to a small group of mobile phone assemblers.
   The Fix: Add a lower turnover tier with simpler claim documentation so first time manufacturers can enter the scheme.
3. Assembly without deepening: Incentives reward final assembly, so domestic value addition stays low where components continue to be imported. Eg. India’s electronics exports have risen alongside rising imports of components and sub assemblies.
   The Fix: Tie each incentive tranche to a rising domestic value addition threshold verified at the component level.
4. Factor market constraints outlast incentives: Land, power reliability and labour regulation decide where a plant is built, and a subsidy changes none of them. Eg. The four labour codes passed in 2019 and 2020 took years to be brought into force.
   The Fix: Publish State level readiness on serviced industrial land, power availability and single window clearance timelines so investors can compare locations.

Conclusion

The instruments changed and the structural shares did not. A campaign judged on manufacturing’s place in output, employment and global exports has moved none of the three, and the one instrument that did pull investment pulled it into a narrow group of sectors. What has not been achieved is broad private capacity creation, and that is the condition the next phase has to meet rather than another incentive line. The marker to watch is whether private capital formation turns up as a share of output, since that is what builds new factories.

Back2Basics: Gross Value Added

1. What it measures: GVA is output minus the value of the intermediate goods and services consumed in producing it. It isolates the value added by each sector, which is why sectoral shares are read off GVA rather than off GDP.
2. Relation to GDP: GDP at market prices equals GVA at basic prices plus product taxes minus product subsidies.
3. Why the series matters: National accounts are periodically rebased on a more recent base year, so the same indicator in an old series and a new series is not directly comparable.

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?”

Why in the News

The Prime Minister has said the world needs “new and trusted locations” for semiconductor manufacturing and that India is readying itself to meet that requirement, while inaugurating SEMICON India 2026 in New Delhi. He said India has entered the second phase of its semiconductor journey, moving beyond policy announcements and plant construction toward commercial production of chips. The pitch answers a specific market condition, that chip companies are looking to diversify their global supply chains away from a narrow set of manufacturing locations. The tension is between the pitch and the base it rests on. India’s semiconductor demand is projected at $110 billion by FY30, while domestic manufacturing remains at a nascent stage and imports have grown at a compound annual rate of 23%.

What is the India Semiconductor Mission?

1. What it does: It is the central programme that provides fiscal support to semiconductor projects in India, covering fabrication, packaging and other parts of the chip value chain.
2. Phase one scale: Twelve semiconductor projects were approved under the first phase, spanning fabrication, packaging and other value chain segments.
3. Phase two scope: The programme has moved to Semicon 2.0, a Rs 1.27 lakh crore programme that widens the focus beyond large chip factories.

Why is India pitching itself as a trusted location now?

1. Supply chain diversification: Chip companies are looking to spread manufacturing across more countries, which creates an opening for a location that is not already in the established set.
2. The trust framing: The pitch was made as a claim about reliability rather than cost, on the stated ground that the world’s trust in India is increasing alongside its economic growth.
3. The supporting economic markers: The claim was anchored on 7.8% quarterly GDP growth, a recent sovereign rating upgrade by a Japanese credit rating agency, and the New Delhi Declaration adopted at the BRICS Summit India hosted this month.
4. The stated pace: India has achieved in about four years what generally takes countries around a decade to build, though semiconductor manufacturing was described as a journey with no end point.

What has the first phase actually delivered?

1. Projects in production: Five of the twelve approved projects have already started commercial production, which is the marker separating phase one from phase two.
2. Memory output from Gujarat: Micron Technology has begun shipping DRAM (Dynamic Random Access Memory) and NAND memory products to customers globally from its Sanand facility in Gujarat.
3. The scale up path there: The plant is expected to assemble and test tens of millions of chips this year, scaling to hundreds of millions next year.
4. Design and engineering presence: Infineon Technologies, a German chipmaker, now has over 2,800 employees in India, and has said India has potential to strengthen its position across the global semiconductor value chain as its domestic market and technology capabilities expand.

What does Semicon 2.0 change about the approach?

1. Beyond the fab: The programme extends support to semiconductor equipment, materials, design, research and development, supply chains and skilled manpower, rather than to large chip factories alone.
2. The ecosystem logic: A fabrication plant depends on a surrounding base of tool makers, chemical and gas suppliers and trained engineers, which the first phase did not fund directly.
3. Project count: The next phase is expected to see the number of approved projects increase further.

How large is the demand gap the mission is chasing?

1. Projected demand: India’s semiconductor demand is projected to reach $110 billion by FY30 and to exceed $200 billion by FY35.
2. The import bill so far: The country spent almost $150 billion on semiconductor product imports between FY17 and FY25.
3. The trajectory if nothing changes: Imports grew at a compound annual growth rate of 23% over that period, and on the same trend annual imports could reach $240 billion by 2035.
4. The policy conclusion drawn: Building a comprehensive semiconductor ecosystem has been identified as an urgent national priority on the strength of that gap.

Challenges to the India Semiconductor Mission

1. Utility reliability at fab sites: A fabrication plant needs continuous ultrapure water and uninterrupted power, and an interruption of either scraps the wafers in process. Eg. Taiwan’s chip plants cut water use and trucked in supplies during the 2021 drought when the island’s reservoirs fell to record lows.
   The Fix: Ring fence dedicated water recycling plants and captive power capacity for each approved site as a condition of disbursal.
2. Fabrication workforce depth: India’s semiconductor engineers sit in design centres rather than in fabrication and process engineering, which is a different skill base. Eg. Design centres of global chipmakers have operated in Bengaluru and Hyderabad for over two decades without a commercial fabrication plant alongside them.
   The Fix: Tie a share of the incentive to process engineer placements trained through partnerships with operating fabs abroad.
3. Equipment and materials import dependence: The tools and high purity inputs a fab consumes come from a handful of global suppliers, so domestic assembly does not by itself reduce external exposure. Eg. Extreme ultraviolet lithography machines are produced by a single company, ASML of the Netherlands.
   The Fix: Anchor equipment and materials suppliers in India through long term purchase commitments from the approved plants rather than through subsidy alone.
4. Competition at mature nodes: India’s approved capacity targets older process nodes, where large capacity additions elsewhere can push prices below the level a new entrant needs. Eg. Sustained capacity expansion in China at 28 nanometre and older nodes has driven down prices for legacy chips.
   The Fix: Condition support on secured long term offtake contracts rather than on installed capacity alone.

Conclusion

The pitch is that trust and diversification, rather than cost, are what bring chip manufacturing to India. The measurable claim behind it is narrower, five plants in commercial production against a demand curve heading for $200 billion. Semicon 2.0’s widening into equipment, materials and skills is the part that decides whether the fabs have a supply base around them, and the count of projects approved under it is the next thing to watch.

Matching Previous Year Question

“[2025, GS3, 15] India aims to become a semiconductor manufacturing hub. What are the challenges faced by the semiconductor industry in India? Mention the salient features of the India Semiconductor Mission.”