India Evolving PLI Scheme into a more targeted and robust framework marks a significant shift in the country’s industrial and economic policy. As the nation aims to become a global manufacturing powerhouse, the transformation of the Production-Linked Incentive (PLI) scheme is expected to drive deeper localization, promote high-value components, and enhance supply chain resilience.
What is the PLI Scheme?
The Production-Linked Incentive PLI scheme was launched in 2020 to boost domestic manufacturing in key sectors. The idea was simple: incentivize companies for incremental production. By offering financial rewards tied directly to output growth, India aimed to lure investments, reduce import dependency, and generate jobs.
The scheme initially covered 13 sectors including electronics, pharmaceuticals, automobiles, textiles, and solar modules. With an estimated budget of over ₹1.97 lakh crore (~$24 billion), the PLI scheme attracted global attention and participation from major Indian and foreign companies.
Why is the PLI Scheme Evolving?
While the PLI scheme has seen early success in sectors like mobile manufacturing (Apple, Samsung, and Foxconn ramping up India operations), some industries faced challenges in meeting targets due to:
- Supply chain issues
- Global inflation
- COVID-19 disruptions
- Technology and skill gaps
In response, the Indian government is recalibrating the scheme to focus more on core component manufacturing and value chain integration, rather than just assembly and end products.
The Shift to a Component Manufacturing Scheme
India is now moving toward a new ₹22,900 crore “Component Manufacturing Scheme”, which is set to replace or merge with some existing PLI incentives. This evolved model aims to:
- Prioritize high-value components (e.g., semiconductors, advanced batteries, sensors)
- Encourage technology transfer and R&D
- Support green manufacturing and sustainability goals
- Promote SMEs and MSMEs in the supply chain
The new policy architecture will focus on deep-rooted industrial growth, moving away from “surface-level” assembly and into IP creation, precision engineering, and core technology production.
Impact on Key Sectors
Electronics & Mobile Phones
India has become the world’s second-largest mobile phone producer, thanks to the PLI scheme. With the new approach, the focus will now shift to:
- Making displays, chipsets, PCBs, sensors locally
- Enhancing design and innovation capabilities
- Expanding the semiconductor ecosystem
Automobiles & EVs
EV battery and motor production will receive greater incentives. The aim is to build a green mobility ecosystem with localized parts, reducing dependency on China.
Pharmaceuticals
The shift will strengthen the domestic API (Active Pharmaceutical Ingredient) industry and advanced formulations, reducing import vulnerability.
Renewable Energy
Solar modules and storage solutions are now central to India’s green economy. The new scheme will deepen investments in solar wafers, cells, and battery chemistries.
The MSME Boost
A key criticism of the earlier PLI model was its bias toward large corporations. The restructured policy will include:
- Special sops for small and medium enterprises
- Easier credit access and raw material linkage
- Priority in R&D partnerships and cluster development
This approach ensures broader participation and prevents monopolistic growth patterns.
Strategic Implications
India’s evolving PLI scheme aligns with its larger goals:
- Make in India 2.0: Self-reliance with global competitiveness
- Atmanirbhar Bharat: Reducing strategic import dependency
- Supply Chain Resilience: Especially in sectors like electronics, pharma, and defense
- Job Creation: Focused growth in Tier 2 and Tier 3 cities
By 2030, the Indian government expects manufacturing to contribute over 25% to GDP, up from the current 17%.
Challenges Ahead
Despite the optimism, execution remains critical:
- Ensuring ease of doing business
- Bridging the skill gap
- Creating infrastructure and logistics hubs
- Avoiding bureaucratic delays
Regular audits, performance metrics, and transparent allocation will be essential to sustain investor trust.
The Road Ahead
India’s PLI scheme is no longer just a subsidy tool—it’s becoming a strategic industrial policy instrument. By evolving into a component-centric model, the country is preparing itself to lead in advanced manufacturing, drive sustainable development, and become a trusted global partner in future technologies.
If successfully implemented, this new avatar of the PLI scheme could propel India into the league of top 5 global manufacturing hubs in the next decade.
