PLI Schemes & India's Manufacturing Competitiveness — Make in India 2.0

Context: India's Manufacturing Challenge

India's manufacturing sector contributes approximately 17–18% of GDP — well below the government's target of 25% and far behind China (~28%), South Korea (~27%), or Vietnam (~24%). The share of manufacturing in employment similarly lags. The COVID-19 pandemic and the global reassessment of supply chains created a strategic window for India to attract manufacturing investment, which the PLI framework attempts to capture.

Production Linked Incentive (PLI) Schemes

What Are PLI Schemes?

PLI schemes provide financial incentives to manufacturers based on incremental sales over a base year. Unlike capital subsidies or tax holidays, PLI incentives are paid only after production occurs, linking the government's expenditure directly to output performance.

Core Mechanism:

• A base year's sales figure is established
• Incentive = (Incremental sales above base) × (Applicable % rate, typically 4–10%)
• Manufacturers must meet minimum investment thresholds and production targets to remain eligible

This design minimises fiscal risk to the government — if there is no production, there is no outlay.

The 14 PLI Sectors

PLI schemes were extended across 14 key sectors with a combined outlay of ₹1.97 lakh crore (~US$26 billion):

PLI Achievements (As of 2025)

Sector-specific highlights:

• Pharmaceuticals: India reversed its trade position in bulk drugs — from a deficit of ₹1,930 crore in FY2021-22 to a surplus of ₹2,280 crore in FY2024-25
• Electronics: Production grew ~146%, from ₹2.13 lakh crore (FY2020-21) to ₹5.25 lakh crore (FY2024-25)
• Solar PV: Investments of ₹48,120 crore committed; ~38,500 direct jobs
• Auto Components: ~₹29,500 crore attracted; ~45,000 jobs by early 2025

Make in India 2.0

Make in India was launched in 2014 with an initial focus on manufacturing. Make in India 2.0 has expanded the scope to 27 sectors — 15 manufacturing and 12 service sectors — with emphasis on deepening FDI liberalisation, easing regulatory barriers, and improving infrastructure.

The four pillars of Make in India remain:

1. New Processes — Ease of doing business reforms
2. New Infrastructure — Industrial corridors, logistics networks
3. New Sectors — Expanding beyond traditional sectors
4. New Mindset — Government as partner, not regulator

The manufacturing target under National Manufacturing Policy was to raise manufacturing's share in GDP to 25% by 2025 — not achieved; the actual share stands at approximately 17–18% of GDP. The target timeline has been revised to 2030 under Atmanirbhar Bharat and Make in India frameworks.

Industrial Corridors

India's National Industrial Corridor Development Programme (NICDP) is developing 11 industrial corridors to create world-class industrial infrastructure. These corridors are planned along Dedicated Freight Corridors (DFCs) and major transport arteries.

DMIC is the flagship corridor — 1,504 km long, with an investment vision of US$100 billion. It includes six greenfield industrial smart cities targeting manufacturing clusters in electronics, automobiles, textiles, and defence.

The NICDP is administered by the National Industrial Corridor Development Corporation (NICDC), under the Ministry of Commerce and Industry / DPIIT.

PM Gati Shakti & National Logistics Policy

PM Gati Shakti — National Master Plan (launched October 2021) is a GIS-based digital platform that integrates data from 16 ministries and states to plan infrastructure projects holistically — roads, railways, waterways, airports, ports, and logistics hubs on a single map.

National Logistics Policy (NLP), 2022 aims to:

• Reduce logistics cost — the NLP 2022 stated baseline of ~13–14% of GDP was a rough estimate; the first systematic DPIIT–NCAER study (September 2025) revised actual cost to 7.97% of GDP for FY24, suggesting India is already near the 8–9% target zone
• Improve India's rank on the World Bank Logistics Performance Index
• Digitise logistics through the Unified Logistics Interface Platform (ULIP)

Both policies directly support manufacturing competitiveness by reducing the cost of moving goods to ports and markets.

China+1 Strategy: India's Opportunity

Global supply chains disrupted by the US-China trade war (2018 onwards), COVID-19 (2020-21), and geopolitical tensions have prompted multinational companies to diversify sourcing away from China — the "China+1" strategy. India is a primary beneficiary.

Sectors where India is gaining:

• Electronics — Apple's manufacturing shift (Foxconn, Pegatron, Tata Electronics in Tamil Nadu)
• Pharmaceuticals — API sourcing diversification
• Textiles — Shifting apparel orders from Bangladesh and China
• Semiconductors — Micron's assembly/test facility announced for Gujarat (2023)

India's comparative advantages: Large domestic market, English-speaking skilled workforce, democratic rule of law, time-zone advantage for IT-adjacent manufacturing.

Challenges to Manufacturing Growth

Despite PLI momentum, structural barriers remain:

DPIIT's role: The Department for Promotion of Industry and Internal Trade (under Ministry of Commerce) is the nodal department for PLI implementation, FDI policy, and industrial corridor development. It coordinates the Invest India investment promotion agency.

Recent Developments (2024–2026)

PLI Scheme Achievements — Rs. 20.41 Lakh Crore Production, 14.39 Lakh Jobs (December 2025)

PLI schemes across 14 sectors have delivered significant results by December 2025: Rs. 20.41 lakh crore in cumulative production/sales, Rs. 8.3 lakh crore in exports, Rs. 2.16 lakh crore in investments (against Rs. 1.97 lakh crore outlay), Rs. 28,748 crore disbursed as incentives, and over 14.39 lakh direct/indirect jobs created. The electronics/mobile phones sector leads: mobile phone production reached approximately Rs. 5.25 lakh crore in FY 2024-25 (146% growth from FY 2020-21), with exports crossing Rs. 2 lakh crore in FY 2024-25 (~$24 billion); smartphone exports hit a $30 billion milestone in calendar year 2025. India is now the 2nd largest mobile phone manufacturer globally, with Apple manufacturing approximately 25% of global iPhone production in India by FY2025 (Bloomberg, March 2026), up sharply from 14% in FY2024.

India also achieved net exporter status in bulk drugs (pharmaceuticals) — reducing dependence on Chinese API imports. PLI for white goods (ACs and LED lights) drove Indian brands' global market share expansion.

UPSC angle: PLI aggregate data (14 sectors, Rs. 1.97 lakh crore outlay, Rs. 20.41 lakh crore cumulative sales, Rs. 8.3 lakh crore exports, 14.39 lakh jobs as of December 2025), mobile phone milestone ($30 billion exports, 2nd largest global manufacturer), and the net exporter achievement (bulk drugs) are essential Prelims data points and Mains "Make in India" evidence.

PLI Phase 2 — New Sectors and Post-PLI Framework

The government announced plans for a PLI Phase 2 for select sectors where PLI Phase 1 has wound up, including mobile phones (Phase 1 completed FY 2025-26), to sustain the manufacturing momentum. Post-PLI transition planning includes: (1) Industrial Clusters with shared infrastructure replacing individual PLI incentives; (2) Reduced import duties on inputs where PLI has built domestic scale; (3) Quality certification requirements to prevent China-origin goods being re-routed through India.

The Semiconductor PLI (Semicon India Programme, Rs. 76,000 crore) is in early implementation: Tata-PSMC fab (Dholera, Gujarat), Micron ATMP (Sanand, Gujarat) — with chip production expected only from ~2027. The solar PV PLI allocated 48,337 MW (~48 GW) capacity across two tranches; as of June 2025, 18.5 GW of module capacity is operational along with 9.7 GW of cells and 2.2 GW of ingot-wafer — supporting India's target of 500 GW renewable capacity by 2030.

UPSC angle: PLI Phase 2 planning, Semiconductor PLI (Rs. 76,000 crore, Tata-PSMC fab + Micron ATMP), and solar PV PLI progress (~48 GW allocated; 18.5 GW modules operational by June 2025) represent the next phase of India's manufacturing competitiveness agenda.

India's Manufacturing GDP Share — Still ~17%, Target 25% by 2025

Despite PLI successes, India's manufacturing share of GDP remains around 17% — unchanged since 2011-12, and far below the Twelfth Plan target of 25% by 2025. Compare: China at ~28%, Vietnam at ~25%, South Korea at ~27%. The manufacturing employment share is approximately 11-12% of the workforce — reflecting "premature deindustrialisation" concerns where India is transitioning to services before adequate manufacturing base is built.

The challenges: (1) Infrastructure quality — power reliability, road/port connectivity (improving but still behind China/Vietnam); (2) Labour market rigidity — new Labour Codes not yet fully implemented; (3) Land acquisition — delays of 3-5 years for industrial land; (4) Technology intensity — Indian manufacturing remains in lower-value assembly rather than capital goods or high-tech manufacturing. The Economic Survey 2024-25 specifically recommends "systematic deregulation" for MSMEs as the way to raise manufacturing share.

UPSC angle: Manufacturing GDP share (~17% vs 25% target), the "premature deindustrialisation" argument, and the four structural barriers (infrastructure, labour, land, technology) are the foundation of any Mains GS3 answer on "India's manufacturing challenge."

Exam Strategy Note

For GS3 Prelims, memorise: 14 PLI sectors, ₹1.97 lakh crore outlay, 24 DRSCs are a Polity topic. For Mains, PLI schemes are excellent examples to use in answers on industrial policy, export promotion, and China+1. Link to Make in India 2.0, PM Gati Shakti, and National Logistics Policy. Connect manufacturing growth to employment generation (GS1 society angle) and environmental concerns of rapid industrialisation (GS3 environment angle).