The Indian government is working on refining the Production-Linked Incentive (PLI) scheme to increase local value addition and export-driven growth in key industries. While the scheme has successfully attracted investment across multiple sectors, officials believe that further improvements are needed to address import dependency and enhance India's global manufacturing competitiveness.Since its launch in April 2020, the PLI scheme has been instrumental in drawing substantial investments in 14 priority sectors, including electronics, pharmaceuticals, food processing, and telecom equipment. The initiative has helped position India as a preferred destination for manufacturing, encouraging original equipment manufacturers (OEMs) and contract manufacturers to expand their operations in the country.However, recent reports highlight that value addition within India remains low in several industries, leading to discussions on the need for deeper localization and stronger export incentives to sustain long-term growth.
 

Addressing Import Dependency and Strengthening Exports

One of the biggest challenges hindering the success of the PLI scheme is India’s high dependence on imports, particularly from China, for key components in electronics, telecom, and IT hardware manufacturing. While the scheme has successfully increased final product assembly in India, raw materials and core components are still being sourced from international markets.Experts suggest that export performance should become a key criterion for granting PLI incentives, as this would encourage Indian businesses to compete globally. By tying financial incentives to export targets, the government aims to push domestic companies to become part of the global supply chain and reduce reliance on foreign imports.Another concern is India’s relatively small domestic market in industries like telecom and semiconductors, which discourages component manufacturers from setting up local production. To overcome this, policymakers believe that foreign OEMs must play a larger role in strengthening India’s industrial ecosystem. Attracting global manufacturers to set up end-to-end production facilities in India could drive technology transfer, job creation, and supply chain expansion.
 

Refining the PLI Scheme to Ensure Balanced Growth

Although the PLI scheme has been highly successful in certain industries, its impact has been uneven across different sectors. Industries like food processing, mobile phone manufacturing, and pharmaceuticals have seen significant job creation and capacity expansion, while sectors such as IT hardware, textiles, and advanced chemical cells have yet to experience similar levels of success.
 

Government officials are currently reviewing strategies to address gaps in the current incentive structure. Some of the potential improvements include:

• Increasing incentives for companies with high export potential to boost India’s share in global markets.
• Providing targeted support for component manufacturing to reduce import dependency in critical industries.
• Enhancing financial support for research and development (R&D) to drive innovation and indigenous production.
• Encouraging foreign OEMs to establish large-scale production facilities in India to strengthen local supply chains.

With these refinements, the PLI scheme is expected to significantly improve India’s manufacturing competitiveness while supporting self-reliance in key industries. The government remains committed to expanding domestic production capabilities and ensuring that India becomes a major global player in industrial exports.By prioritizing export-driven growth, deeper localization, and stronger foreign investments, India aims to achieve long-term industrial expansion and reduce reliance on imported components. The revised PLI strategy will play a crucial role in shaping the country’s manufacturing landscape in the coming years.