India’s growth story is undergoing a transformative chapter—powered not just by its digital economy and consumer base, but increasingly by a robust, modern manufacturing ecosystem. And at the heart of this transformation lies a powerful policy push: the Production Linked Incentive (PLI) Scheme. Launched by the Government of India to reinvigorate domestic manufacturing, create jobs, reduce import dependence, and boost exports, the PLI scheme is fast emerging as a game-changer in India’s economic roadmap.
In this blog, we will unpack everything you need to know about the PLI scheme—what it is, how it works, which sectors benefit, and why it’s crucial for India’s industrial future.
Introduction to the PLI Scheme
The Production Linked Incentive (PLI) Scheme is a government initiative aimed at providing financial incentives to companies for enhancing their domestic manufacturing capabilities and increasing production. The goal? To transform India into a global manufacturing hub.
First introduced in 2020 amid the COVID-19 pandemic, the scheme was seen as a strategic response to reconfigure global supply chains and attract investment from companies looking to diversify away from China. It was initially rolled out for three sectors—mobile manufacturing and specified electronic components, pharmaceutical ingredients, and medical devices.
Since then, its scope has expanded dramatically, both in terms of scale and ambition. Today, the PLI scheme covers 14 strategic sectors with a committed outlay of ₹1.97 lakh crore over five years. As of early 2024, around 755–764 applications have been approved, resulting in realised investments exceeding ₹1.46 lakh crore, over 9.5 lakh jobs created, and production worth more than ₹12.5 lakh crore, with exports crossing ₹4 lakh crore.
Objectives and Vision Behind the Scheme
The core vision of the PLI scheme aligns with the larger national strategies like “Make in India” and “Atmanirbhar Bharat” (Self-Reliant India). It seeks to:
- Encourage domestic production and value addition
- Attract global manufacturers to set up base in India
- Create employment opportunities
- Reduce reliance on imports
- Improve cost competitiveness of Indian goods globally
- Boost exports and improve trade balance
By directly linking incentives to production output, the government ensures that benefits are performance-driven and outcome-oriented—a major departure from earlier subsidy-led policies.
How Does the PLI Scheme Work?
The PLI scheme operates on a simple but powerful principle: companies receive financial incentives based on incremental sales of goods manufactured in India. These incentives are typically provided as a percentage of the increase in sales (over a base year) over a specific number of years.
Key Features:
- Performance-Based Incentives: Only manufacturers that meet defined sales targets and value addition requirements are eligible.
- Time-Bound: Most schemes run for 5 years.
- Sector-Specific Criteria: Each sector under the PLI has unique eligibility norms, targets, and incentive rates.
- Domestic & Foreign Participation: Open to Indian firms and foreign companies establishing manufacturing in India.
For example, in mobile manufacturing, global players like Apple’s suppliers (Foxconn, Wistron, Pegatron) and domestic firms like Lava and Micromax were among the early beneficiaries.
Sectors Covered Under the PLI Scheme
The PLI scheme spans 14 sectors, carefully selected for their strategic importance, employment potential, and export orientation. These include:
- Mobile Manufacturing & Electronics
- Pharmaceutical Drugs
- Telecom & Networking Products
- Food Processing
- White Goods (ACs & LEDs)
- Textiles (MMF and Technical Textiles)
- Specialty Steel
- Drones & Drone Components
- Solar PV Modules
- Advanced Chemistry Cell (ACC) Batteries
- Automobiles & Auto Components
- Medical Devices
- IT Hardware
- Key Starting Materials (KSMs)/Active Pharmaceutical Ingredients (APIs)
By August 2024, these sectors had collectively contributed to over ₹6,700 crore in incentive disbursals, with PLI investments accelerating particularly in mobile phones, EVs, pharmaceuticals, and solar energy.
Benefits of the PLI Scheme
The PLI scheme is already making waves across India’s industrial landscape. Here are the major benefits:
a. Boost to Manufacturing
The scheme directly incentivises firms to scale up manufacturing operations. Many global giants and Indian firms are setting up or expanding plants, especially in sectors like electronics, automotive, and pharmaceuticals.
b. Increased FDI Inflow
PLI has significantly enhanced India’s attractiveness as a manufacturing destination. Foreign firms are now more confident in investing due to policy stability and performance-linked incentives.
c. Employment Generation
With higher production comes more jobs. The government estimates the PLI scheme could generate over 60 lakh new jobs, directly and indirectly.
d. Import Substitution
In sectors like APIs (Active Pharmaceutical Ingredients) and solar PVs, where India heavily depends on imports, the PLI is helping build domestic capability.
e. Export Competitiveness
By making Indian manufacturing cost-competitive and globally aligned, the scheme boosts exports. For instance, smartphone exports exceeded US$11 billion in FY 2023–24, with Apple’s iPhone exports alone touching US$12 billion—a dramatic increase from near-zero levels a few years ago.
Challenges and Criticisms
While the scheme has seen early success, it’s not without challenges.
a. Implementation Delays
Some sectors have reported delays in the disbursement of incentives, mainly due to compliance complexities and capacity ramp-up challenges. As of mid-2024, less than 5% of the total ₹1.97 lakh crore outlay had been disbursed.
b. Entry Barriers for MSMEs
High investment thresholds in some sectors make it difficult for smaller players or startups to participate. Although the government is exploring relaxed norms and additional schemes, inclusion remains a concern.
c. Supply Chain Bottlenecks
India still relies on imported raw materials in sectors like electronics and semiconductors, which undermines the scheme’s goal of self-sufficiency.
d. Monitoring and Accountability
Ensuring transparency, preventing misuse of incentives, and verifying real production gains require robust digital and institutional monitoring mechanisms.
Key Success Stories and Milestones
Let’s look at some real-world impact examples that highlight the scheme’s success:
1. Mobile Manufacturing
Apple’s contract manufacturers have significantly increased iPhone production in India. Exports from India touched US$12 billion in FY 2023–24, positioning India as a key node in Apple’s global supply chain.
2. Pharmaceuticals
Indian companies like Aurobindo Pharma and Sun Pharma are setting up large-scale facilities for KSMs and APIs that were earlier imported from China.
3. Auto Components & EVs
Mahindra & Mahindra, Tata Motors, Ola Electric, and several auto parts makers are leveraging PLI incentives to build electric vehicle and battery ecosystems in India.
4. Solar PV Modules
Reliance, Adani, and other conglomerates are investing heavily in gigawatt-scale solar module manufacturing, sharply reducing India’s dependence on imported Chinese modules.
Future Outlook and Way Forward
The PLI scheme isn’t just a policy—it’s a blueprint for India’s industrial revival. However, to truly unlock its potential, several strategic moves are needed:
- Policy Synchronisation: Align PLI with broader trade, taxation, logistics, and labour reforms to create a holistic industrial ecosystem.
- Inclusion of MSMEs: Lower entry thresholds and create sector-specific variants for MSMEs and startups that demonstrate innovation and scalability.
- Skilling Initiatives: With new manufacturing facilities being set up, there’s an urgent need to invest in vocational training and skill development.
- Sustainability Focus: Future iterations of PLI could promote green manufacturing and net-zero technologies aligned with India’s climate commitments.
The good news? The government is proactively exploring new sectors for PLI coverage—such as toys, bicycles, leather, and furniture—to diversify India’s manufacturing base and boost employment in traditional industries.
Final Thoughts:
The Production Linked Incentive (PLI) Scheme marks a pivotal shift in India’s industrial policy—moving away from input subsidies toward output-driven incentives. In doing so, it provides the right push to build scale, efficiency, and competitiveness across strategically important sectors.
While challenges remain, the early outcomes are promising. India is fast emerging as a viable alternative to global manufacturing giants. For entrepreneurs, investors, and professionals, understanding and leveraging the PLI scheme could be a game-changing move in the coming decade.
So, whether you are running a manufacturing business, scouting for investment opportunities, or simply trying to make sense of India’s economic ambitions, keep a close eye on the PLI scheme—it’s reshaping the Indian growth story, one incentive at a time.
