Why in the News?
- The $23 billion Production-Linked Incentive (PLI) scheme, launched in 2020 to boost domestic manufacturing and reduce dependence on China, is set to lapse as many firms failed to meet production targets.
- The scheme was aimed at increasing manufacturing’s share in India’s GDP to 25% by 2025, but it has declined from 15.4% to 14.3%
- Only 37% of the expected production target was achieved, with $151.93 billion worth of goods manufactured by October 2024.
- Delays in subsidy payouts and excessive bureaucracy hampered the scheme’s effectiveness.
About the PLI Scheme:
- The Production Linked Incentive (PLI) scheme was launched to boost domestic manufacturing, increase import substitution, and generate employment.
- The scheme initially targeted three industries: Mobile and Allied Component Manufacturing, Electrical Component Manufacturing and Medical devices. Later, it was expanded to 14 key sectors.
- Under this scheme, Domestic and Foreign companies receive financial incentives based on a percentage of their incremental revenue for up to five years.
Performance of the PLI Scheme:
- Mobile Phones: Major success – Production rose 63% from 2020-24, reaching $49 billion. Apple and Samsung dominate exports.
- Pharmaceuticals: Strong growth – Exports nearly doubled to $27.85 billion (2023-24).
- Food Processing: Exceeded production targets, but some firms missed subsidy eligibility due to investment non-compliance.
- Steel & Solar Panels: Lagging sectors – 14 out of 58 approved steel projects withdrawn, 8 out of 12 solar firms unlikely to meet targets.
- Textiles & IT Hardware: Slow growth, struggling to compete with China's lower production costs.
- 94% of the $620 million incentives disbursed (April-Oct 2024) went to pharmaceuticals and mobile phones, highlighting uneven sectoral success.
