Modi Govt Might Not Extend $23 Bn PLI Scheme Despite Corporate Demand: Here’s Why

Prime Minister Narendra Modi’s government is not planning to extend its flagship Production-Linked Incentive (PLI) scheme beyond its current timeline. Launched in 2021 with an outlay of about $23 billion, the programme aims to boost domestic manufacturing and attract global investment.

According to a Reuters report citing government officials and documents, the government is not in favour of expanding the scheme beyond the existing 14 sectors or extending the production deadlines for current participants.

As of October 2024, firms had produced $151.93 billion worth of goods under the programme, achieving just 37% of the target. Meanwhile, only $1.73 billion in incentives—less than 8% of allocated funds—had been issued, according to a commerce ministry analysis the news agency citied. Notably, manufacturing's share of India’s GDP has declined from 15.4% to 14.3% since the scheme’s launch.

PLI Beneficiaries, their Challenges

In a response to Parliament, Minister of State for Commerce & Industry Jitin Prasada said that 764 applications have been approved under the PLI schemes across 14 sectors.

As of November 2024, actual investments worth Rs. 1.52 lakh crore ($17.99 billion) had been realised, leading to incremental production and sales worth Rs. 13.37 lakh crore ($158.53 billion) and the generation of over 1.1 million jobs. Additionally, exports under PLI schemes have surpassed Rs. 5 lakh crore ($59.26 billion), with significant contributions from electronics, pharmaceuticals, and food processing sectors.

Among the biggest beneficiaries of the PLI scheme are Apple supplier Foxconn and Reliance Industries. Since its introduction, smartphone production in India has surged, reaching $49 billion in the 2023-24 fiscal year, a 63% increase from 2020-21, according to government data. Similarly, pharmaceutical exports have nearly doubled, reaching $27.85 billion in 2023-24 compared to a decade ago.

However, some sectors are still struggling to meet their production targets. As of December 2024, a renewable energy ministry analysis reportedly found that eight out of twelve companies in India’s solar PLI scheme, including Reliance, Adani Group, and JSW, are unlikely to meet their targets. Reliance is projected to achieve only 50% of its production goal by the end of the 2027 fiscal year, when the solar PLI scheme ends. The Adani entity has reportedly yet to order key manufacturing equipment, while JSW has not initiated any production activities.

Similarly, in the steel sector, 14 out of 58 approved PLI projects have been withdrawn or removed due to lack of progress, the Reuters report added.