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 from ~13–14% of GDP to below 8% (comparable to developed economies at 8%)
• 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.

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).