PLI incentive schemes: achieving ambitions, but timelines and progress vary

While the Indian economy has grown rapidly in the post-Covid years, private capex has remained relatively tepid and restricted to a few sectors. In this context, India’s ambitious Production-Linked Incentive (PLI) and Design-Linked Incentive (DLI) schemes have emerged as pivotal instruments in the nation’s quest to boost domestic manufacturing, attract investments, and enhance export competitiveness. However, the timeliness and progress of these schemes differ appreciably across the 14 sectors.

 

Launched in FY2022, these schemes span 14 sectors with total expected capex of close to Rs. 4.0 trillion under these initiatives. As of March 2025, capex of ₹1.8 trillion has led to incremental sales of ₹16.5 trillion, with exports accounting for 30–35 per cent of this growth. Sectors such as electronics, pharmaceuticals, food processing, and telecom have contributed significantly to this export surge.

 

 

However, the journey has not been uniformly smooth. While the schemes are broadly meeting their objectives, most sectors have struggled to adhere to the intended timelines. Only 16 per cent of the total incentive outlay (₹3 trillion) is expected to be disbursed or become eligible by end-FY2026, with the balance contingent on future production and sales milestones.

 

For instance, in the semiconductors sector, the country’s first end-to-end semiconductor pilot line is operational, and major investments from global players are underway. Capex committed by 10 approved semiconductor projects corresponds to 85 per cent of the total incentive outlay, yet only 15 per cent of the sector’s outlay will be utilised by FY2026, highlighting the long gestation and complexity of these projects.

 

The incentive scheme for mobile Phones has transformed India from a net importer to a net exporter of mobile phones. Production increased by 146 per cent between FY2021 and FY2025, and exports have risen eightfold. Despite this, local value addition remains limited, with high-value components still largely imported.

 

Pharmaceuticals, including medical devices, have seen investments being twice as high as the original projections, driven by manufacturing of key starting materials, drug intermediates, and APIs. The sector has achieved more than 80 per cent value addition, reducing import dependence, especially in China. Encouragingly, India has transitioned from a net importer to a net exporter of bulk drugs between FY2022–FY2025.

 

The PLI scheme for Food Processing has benefited MSMEs, SMEs, and farmers by boosting local procurement of raw materials and strengthening rural incomes. Since the introduction of the PLI Millet Scheme in FY2021, sales of millet-based products have increased twenty-fivefold. The scheme has helped drive value-added exports and created significant employment opportunities in the sector.

 

Nearly 99 per cent of the outlay for Drones will be utilised by FY2025, however, according to the Ministry of Civil Aviation, around 50 per cent had been disbursed as an incentive under the scheme till December 2024.

 

As of February 2025, nearly 73 per cent of the projected investment for Specialty Steel had already been realised. However, only 2 million tonnes of production have been achieved - primarily due to the long gestation period typical of steel plants.

 

The PLI scheme for Telecom has significantly reduced the country’s reliance on imported telecom equipment, resulting in import substitution of 60 per cent. However, the disbursements under the scheme have remained low in the past years. Addressing this concern, the PLI scheme guidelines have been amended to offer more flexibility in product inclusion and claim filing to increase PLI disbursement in the coming years.

 

Similarly, in response to industry feedback, the Ministry of Textiles simplified the claim processing mechanism in November 2024 followed by amendments by the Ministry in August 2025 to further encourage investment and streamline compliance.

 

Under the schemes for White Goods and IT hardware, disbursement remained low for IT hardware and white goods despite launch of multiple rounds under scheme for both schemes. Further, FY2024 was the first performance year of the Automobiles scheme, for which disbursement happened in FY2025; disbursement is expected to pick up from FY2026 onwards.

 

The projects under the scheme for ACC Batteries were under the gestation period till December 2024, however, as per industry sources the companies have missed the initial timeline citing challenges in execution.

 

Lastly, on Solar PV modules, while a few players have commissioned cell units and one completed an ingot and wafer facility, the overall progress remains slow in relation to the timelines under the PLI scheme. This is attributed to the significant reduction in prices across the solar module value chain over the past two years, adversely impacting the viability of these units in India.

 

Overall, the PLI and DLI schemes have generated direct and indirect employment for an appreciable 1.2 million individuals between FY2022 and FY2025. Moreover, ICRA estimates that around Rs. 2.5 trillion capex will be incurred by March 2026, which is 60-65 per cent of the total estimated capex. Nevertheless, against this, only 16 per cent of the total incentive outlay (i.e., 16 per cent of Rs. 3 trillion) would be disbursed or would become eligible to be disbursed by end-FY2026.

 

Our channel checks reveal that while some sectors have experienced operational delays—regulatory, infrastructure, and supply chain—others have faced lags in incentive disbursement. Recognising the challenges, the Government of India continues to refine allocations, amend policies, and invite new applications to enhance efficiency and investment. Sustained effort and policy innovation will be crucial to fully realise the schemes’ potential and ensure that India’s manufacturing ambitions are not derailed by missed timelines. 

 

The author is Chief Economist and Head Research and Outreach at ICRA Limited. Views are her own.