India’s Production-Linked Incentive (PLI) Initiative

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The Production-Linked Incentive (PLI) scheme aims to bolster domestic manufacturing, reduce import reliance, and enhance export competitiveness. However, certain sectors have encountered delays due to funding bottlenecks, resource constraints, and prolonged setup times, slowing employment growth and output expansion.

Key Factors Behind Delays

Limited Incentive Disbursement: In the initial years, the disbursement of approved incentives remained low. This reduced the pace of capacity expansion, as companies struggled to scale production promptly.

Resource and Input Constraints: Difficulty in accessing critical machinery, skilled technicians, and essential components—often sourced from abroad—hampered timely project execution. This dependency on imports delayed the transition to robust local production ecosystems.

Strict Eligibility Requirements: While designed to ensure quality and efficiency, stringent criteria limited the number of eligible participants. Smaller firms found it challenging to meet these standards, curbing their ability to benefit from the incentives.

Prolonged Setup Timelines: Establishing domestic manufacturing bases, especially in complex sectors like solar modules and advanced chemical cells, required one to three years of groundwork. This delayed the anticipated impact on employment and productivity.

Continued Import Reliance: Some sectors remained heavily dependent on imports, hindering rapid progress toward self-sufficiency and affecting the scheme’s intended outcomes.

Sectors Facing Slow Progress:

Solar Modules: Although solar modules are strategically important, setting up integrated manufacturing has been slow. While module capacity has increased, limited cell production caused supply shortages.

Advanced Chemical Cells (ACC): Complex technology and long commissioning periods led to slower investment returns and delayed employment generation in this sector.

Automobiles: Rising material costs and shifting consumer preferences toward electric mobility complicated efforts to revitalize traditional automobile manufacturing under PLI.

Textiles: Competitive pressures and stringent standards discouraged broader participation, limiting growth and job creation.

IT Hardware: Despite recent funding increases, the IT hardware sector lags behind more established areas like mobile manufacturing.

Enhancing PLI Effectiveness

Strengthening Supply Chains: Improving domestic supplier networks can streamline production and reduce reliance on imports.

Easing Resource Availability: Facilitating access to critical machinery and skilled labor can accelerate project timelines.

Monitoring and Adjusting: Regular reviews can detect bottlenecks early, enabling timely policy corrections.

Relaxing Eligibility Norms: Loosening criteria can encourage wider participation, including smaller firms, enhancing sectoral resilience.

Fostering Ancillary Industries:  Supporting ancillary units around major beneficiaries can create jobs, strengthen value chains, and boost overall manufacturing capacity.