Production Linked Incentive Scheme India: Enhancing Manufacturing Growth & Investments

The Production Linked Incentive (PLI) scheme in India is designed to boost manufacturing by providing financial incentives that encourage local production expansion and reduce reliance on imports. Launched in 2020, this initiative provides financial incentives based on the incremental sales of goods produced in India. Aimed at making India a global manufacturing hub, the production linked incentive scheme India fosters investments, promotes large-scale production, and enhances economic resilience across various sectors to enhance India’s global competitiveness. In this article, we will explore the key features, sectors covered, business opportunities, application process, and success stories associated with the PLI scheme.

Key Takeaways

• The Production Linked Incentive (PLI) Scheme aims to enhance India’s manufacturing capabilities, attract investments, promote exports across over 14 key sectors, and enhance India’s global competitiveness.

• The PLI Scheme provides performance-based financial incentives, rewarding companies based on incremental sales, which ensures only those contributing to increased production benefit from the program.

• The scheme has significantly boosted employment, generating over 11.5 lakh jobs and transforming India’s manufacturing landscape towards high-value products in sectors like electronics and pharmaceuticals.

Introduction

India’s push for self-reliance, embodied in the Aatmanirbhar Bharat initiative and the india initiative, underscores the critical role of domestic manufacturing capability in the global markets. As countries worldwide grapple with supply chain disruptions and economic uncertainties, the country’s reliance on the need to boost domestic manufacturing and improve domestic manufacturing capabilities has never been more pronounced. Additionally, promoting indian products and local manufacturing can further enhance these efforts to manufacture these goods, ultimately increasing the manufacturing capacity.

The Production Linked Incentive (PLI) Scheme stands out as a game-changer in this context, designed to propel India’s manufacturing sector to new heights. The PLI Scheme aims to:

• Transform India into a global manufacturing hub

• Foster investments and technological advancements across various sectors

• Reduce import dependency

• Boost exports

• Enhance India’s economic resilience and global competitiveness.

By supporting domestic and foreign companies, the scheme also enables local companies to benefit, boosting their growth and competitiveness within India’s manufacturing and export sectors.

What is the PLI Scheme?

The Production Linked Incentive (PLI) Scheme, launched by the Indian government in 2020, is a strategic initiative aimed at boosting domestic manufacturing and reducing reliance on imports. The scheme was approved by the Union Cabinet. Unlike traditional subsidies, which often provide blanket financial support, the PLI Scheme offers targeted incentives based on incremental sales of goods manufactured in India. This approach ensures that only those companies that demonstrate tangible growth and production improvements benefit from the scheme.

The primary objective behind the PLI Scheme is to enhance India’s manufacturing capabilities, attract investments, and promote large-scale production across various sectors. When first launched, the scheme initially targeted sectors such as mobile manufacturing, electronics, and medical devices, setting the foundation for broader sector inclusion. This initiative creates a conducive environment for both domestic and foreign companies to establish and expand manufacturing units in India. This initiative is part of the broader vision to position India as a key player in the global supply chain.

In essence, the PLI Scheme is designed to drive significant investments in high-potential sectors, thereby fostering innovation, job creation, and overall economic growth. Its unique structure and targeted approach make it a pivotal component in India’s journey towards becoming a self-reliant and globally competitive economy.

Key Features of the PLI Scheme

Incentive Mechanism: One of the standout features of the Production Linked Incentive (PLI) Scheme is its incentive mechanism, which is based on incremental sales of goods manufactured in India. Companies are rewarded with financial incentives ranging from 4% to 6% on the value of their incremental sales over a base year. This performance-based approach ensures that only those companies that actively contribute to increasing domestic production and sales benefit from the scheme.

Scheme Duration: The duration of the PLI Scheme typically spans 5 to 7 years, providing a stable and long-term framework for companies to plan and execute their investment and production strategies. This extended timeline allows businesses to make substantial and sustainable improvements in their manufacturing capabilities, further enhancing their competitiveness.

Sector-Specific Eligibility: Eligibility for the PLI Scheme is sector-specific, with each sector having its own set of criteria and thresholds for minimum investment and sales. Companies involved in manufacturing within these target segments are eligible for incentives and must meet certain investment and sales thresholds to benefit from the scheme. This tailored approach ensures that the incentives are aligned with the unique needs and potential of each industry, thereby maximizing the overall impact of the scheme.

Sectors Covered Under the PLI Scheme (2025 Update): List of 14+ Key Sectors

1. Mobile and Electronics Manufacturing: This sector includes the production of mobile phones and allied electronic components, playing a pivotal role in reducing import dependency and boosting exports.

2. Pharmaceuticals: Focused on bulk drugs and active pharmaceutical ingredients, this sector aims to strengthen domestic healthcare manufacturing and reduce reliance on imports.

3. Textiles (MMF & Technical Textiles): Targeting man-made fibers and technical textiles, this sector supports innovation and export growth in the textile industry.

4. Automobiles and Auto Components: This sector promotes the manufacturing of vehicles and their parts, fostering technological advancements and employment opportunities.

5. Advanced Chemistry Cell (ACC) Batteries: Focused on manufacturing advanced battery technologies, this sector supports the electric vehicle ecosystem and energy storage solutions.

6. Allied Component Manufacturing: Encompasses the production of various components essential for multiple industries, enhancing the local supply chain.

7. Specialty Steel: Aims to boost production of high-quality steel used in defense, automotive, and other strategic sectors.

8. Solar PV Modules: Supports the renewable energy sector by promoting domestic manufacturing of solar photovoltaic modules.

9. Drones and Components: Encourages the growth of the drone manufacturing industry, including components and related technology.

10. Semiconductors: Focuses on developing semiconductor manufacturing capabilities to reduce import dependence in this critical technology sector.

11. IT Hardware: Promotes production of computer hardware and peripherals to strengthen India’s technology manufacturing base.

12. Medical Devices: Supports the domestic manufacturing of essential medical equipment and devices, enhancing healthcare infrastructure.

13. Food Processing: Aims to increase value addition and manufacturing in the food sector, improving supply chains and export potential.

14. Telecom Equipment: Encourages domestic production of networking products and telecom infrastructure to reduce imports and enhance connectivity.

15. White Goods (ACs & LEDs): Supports manufacturing of household appliances like air conditioners and LED lighting, promoting energy-efficient products.

This comprehensive list highlights the diverse sectors covered under the PLI Scheme, each strategically chosen to enhance domestic manufacturing capabilities and boost India’s global competitiveness.

Top Business Opportunities Under the PLI Scheme

1. Electric Vehicle (EV) Components: The growing demand for electric vehicles presents significant opportunities in manufacturing EV components such as batteries, motors, and control systems. The PLI Scheme supports innovation and production in this emerging sector.

2. Drone Manufacturing: With rapid advancements in drone technology, the production of drones and their components is a lucrative area. The scheme encourages startups and MSMEs to participate in this high-growth industry.

3. Mobile Accessories: The expanding mobile phone market drives demand for accessories like chargers, earphones, and cases. Companies can leverage PLI incentives to scale production and meet rising domestic and export demand.

4. Pharmaceuticals and Medical Devices: Manufacturing of bulk drugs, active pharmaceutical ingredients, and essential medical devices offers robust opportunities under the PLI Scheme, enhancing healthcare infrastructure and export potential.

5. Solar PV Modules: The renewable energy sector, particularly solar photovoltaic module manufacturing, is a key focus area. The scheme promotes domestic production to reduce imports and support India’s green energy goals.

6. Specialty Steel: Production of high-quality specialty steel used in defense, automotive, and other strategic sectors is encouraged, fostering technological advancement and import substitution.

7. Advanced Chemistry Cell (ACC) Batteries: Manufacturing advanced battery technologies for energy storage and electric vehicles is a priority, supported by the scheme to boost India’s clean energy ecosystem.

8. Allied Component Manufacturing: Producing essential components for various industries strengthens the local supply chain and offers diverse business prospects.

9. Textiles (MMF & Technical Textiles): The scheme supports innovation and export growth in man-made fibers and technical textiles, opening avenues for manufacturers in these segments.

10. IT Hardware and Telecom Equipment: Production of computer hardware, networking products, and telecom infrastructure components is incentivized to enhance India’s technology manufacturing base.

11. Food Processing: Increasing value addition and manufacturing in the food sector improves supply chains and export capabilities, supported by the PLI Scheme.

12. White Goods (ACs & LEDs): Manufacturing energy-efficient household appliances like air conditioners and LED lighting is promoted, contributing to sustainable industrial growth.

These business opportunities under the PLI Scheme provide a robust platform for entrepreneurs, MSMEs, startups, and established companies to innovate, scale, and compete globally while contributing to India’s economic growth and global competitiveness.

How to Apply for the PLI Scheme

1. Visit Government Portals: The first step is to access the relevant government portals such as the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Electronics and Information Technology (MeitY), or Ministry of Food Processing Industries (MOFPI). These portals provide detailed information, application forms, and sector-specific guidelines.

2. Prepare Required Documents: Applicants must gather and prepare necessary documents including business registration certificates, financial statements, and detailed project reports. Accurate and complete documentation is essential for a smooth application process.

3. Submit Application: Complete the application form and submit it along with the required documents within the specified timelines and deadlines mentioned on the respective government portals.

4. Utilize Assistance Resources: Companies can seek help from designated contact points and helplines provided by the respective ministries. These resources offer guidance throughout the application process and help resolve any queries.

5. Follow-up and Compliance: After submission, applicants should monitor the status of their application and ensure compliance with any additional requirements or requests made by the authorities to facilitate approval.

Benefits of the PLI Scheme

Boost to Indian Manufacturing: The PLI Scheme incentivizes increased production, enabling domestic industries to scale operations, enhance technological capabilities, and compete effectively on a global scale.

Employment Generation: By driving manufacturing activities and investments, the scheme creates numerous direct and indirect job opportunities, supporting economic growth and improving livelihoods across India.

Attraction of Foreign Direct Investment (FDI): The scheme attracts capital, expertise, and advanced technology from global players, fostering technology transfer and innovation within Indian industries.

Enhancement of Domestic Manufacturing Capabilities: It promotes the establishment and expansion of manufacturing units, improving the overall manufacturing infrastructure and capacity in India.

Reduction in Import Dependency: By encouraging local manufacturing of goods, the scheme helps decrease reliance on imports, strengthening India’s self-reliance.

Promotion of Exports: The PLI Scheme supports increased production of export-quality goods, boosting India’s presence in global markets.

Support for High-Tech and Emerging Sectors: It targets key sectors such as advanced chemistry cell batteries, solar modules, and medical devices, fostering growth in cutting-edge industries.

Performance-Based Incentives: Financial rewards are linked to incremental sales, ensuring that only companies contributing to increased production benefit from the scheme.

Encouragement of Large-Scale Investments: The scheme motivates companies to invest substantially in manufacturing capacity, leading to improvements in industrial infrastructure.

Facilitation of Innovation and Technology Adoption: With increased investments and foreign collaboration, the scheme accelerates the adoption of advanced technologies in Indian manufacturing.

Success Stories & Case Studies

Expansion by Apple Suppliers: Several Apple suppliers have expanded their production facilities in India, significantly boosting the output of mobile phones and related components.

Market Share Growth: The increased production has led to a larger market share for these companies both domestically and internationally.

Global Electronics Supply Chain: This expansion has contributed to strengthening India’s position in the global electronics supply chain.

Pharmaceutical Sector Growth: Companies in the pharmaceutical sector participating in the PLI Scheme have scaled up production of essential medicines and active pharmaceutical ingredients, improving domestic availability and export opportunities.

Quantitative Impact: These initiatives have resulted in increased production volumes, job creation, and higher export revenues.

Electric Vehicle Battery Startups: Startups in the electric vehicle (EV) battery sector have leveraged the PLI Scheme incentives to develop advanced battery technologies and expand manufacturing capabilities.

Support for EV Ecosystem: These advancements are crucial for supporting the growth of India’s EV ecosystem and reducing dependency on imported components.

Role of Chartered Accountants, Consultants & Advisors

Chartered accountants, consultants, and advisors play a pivotal role in helping companies navigate the complexities of the Production Linked Incentive (PLI) Scheme. These professionals are instrumental in:

• Preparing detailed financial projections required for PLI eligibility

• Ensuring that companies meet the necessary investment and sales thresholds

• Assisting in compliance with the scheme’s documentation and regulatory requirements

Their expertise in strategic advisory helps companies select the most suitable sectors for participation, thereby maximizing the benefits of the PLI Scheme.

Download Our eBook: “Mastering the PLI Scheme – 2025 Business Guide”

To help businesses navigate the intricacies of the Production Linked Incentive (PLI) Scheme, we have compiled a comprehensive eBook titled “Mastering the PLI Scheme – 2025 Business Guide”. This guide offers in-depth insights, step-by-step application processes, and practical tips for maximizing the benefits of the PLI Scheme.

Available for purchase via Razorpay, our eBook is an invaluable resource for anyone looking to start or expand their PLI-based business.

Download your copy today and take the first step towards leveraging the PLI Scheme for your business growth. Start your PLI-based business today!

Conclusion

The Production Linked Incentive (PLI) Scheme represents a monumental step towards bolstering India’s manufacturing sector and achieving self-reliance. Targeted incentives and a conducive investment environment aim to transform India into a global manufacturing powerhouse.

We encourage businesses to explore the vast opportunities presented by the PLI Scheme, apply for the incentives, and download our eBook for detailed guidance. Together, we can drive India’s economic growth, create jobs, and enhance our global competitiveness.

Overview of the Production Linked Incentive Scheme

The Production Linked Incentive (PLI) Scheme aims to enhance India’s manufacturing capabilities and boost exports across 14 key sectors. By providing financial incentives to companies that meet production targets, the scheme is designed to attract significant investments and drive economic growth. With a total funding package of approximately $26 billion, the production linked incentive schemes represent one of the largest industrial incentives programs globally.

The PLI Scheme’s impact on exports has been substantial, with exports surpassing ₹5.31 lakh crore, significantly contributing to India’s trade balance. This shift towards high-value products in India’s export basket underscores the scheme’s effectiveness in transforming the industrial landscape. The initiative also aims to position India as a global hub for electronics through substantial investments in mobile phone and electronic component production.

Focusing on key technologies and high-potential sectors, the PLI Scheme boosts production and improves efficiency and competitiveness in manufacturing. Such a comprehensive approach ensures a broad-based industrial growth that can sustain long-term economic benefits.

Key Features of the PLI Scheme

Incentive Linked to Incremental Sales:
The PLI Scheme provides financial incentives directly linked to increased production and incremental sales, ensuring that only companies contributing to growth benefit.

Sector-Specific Tailored Incentives:
Incentives are customized for each of the 14 critical sectors, addressing the unique needs and potential of industries such as electronics, pharmaceuticals, and automotive.

Promotion of High-Tech Industries:
The scheme encourages the development of high-tech industries to create a competitive business environment and stimulate economic activity.

Significant Investment Attraction:
The scheme has attracted approximately ₹1.61 lakh crore in investments, fostering large-scale manufacturing and infrastructure development.

Boost to Domestic Manufacturing and Exports:
PLI supports improvement in domestic manufacturing capabilities and significantly increases exports, shifting India’s export basket towards high-value-added products.

Enhancement of India’s Global Market Presence:
The scheme strengthens India’s position in global markets by promoting products manufactured domestically and enhancing global competitiveness.

Eligibility Criteria for Companies

1. Registration and Manufacturing: Companies must be registered in India and actively engaged in manufacturing goods within specified sectors.

2. Operational Flexibility: Eligible companies can operate existing or new manufacturing units across multiple locations in India, encouraging wider participation.

3. Incremental Investment Thresholds: Companies must meet minimum incremental investment thresholds—Rs. 10 crores for MSMEs and Rs. 100 crores for larger firms.

4. Investment Cap: The maximum incremental investment eligible for incentives is capped at Rs. 1,000 crores under the PLI Scheme.

5. Performance Metrics: Eligibility may also depend on performance criteria such as Gross Management Revenue, Net Worth, and Domestic Value Addition.

6. Base Year Reference: The base year for calculating incremental investments is defined as 2019-20.

7. Focus on Sustainable Growth: These criteria ensure benefits are granted only to companies demonstrating substantial and sustainable growth, aligning with government goals for high-impact industrial development.

Financial Incentives Explained

The Production Linked Incentive (PLI) Scheme provides:

• Cash incentives of 4% to 6% on increased sales over the base year.

• In the electronics manufacturing sector, incentives of 4% to 6% on the incremental sales of domestically manufactured products.

• A performance-based approach that ensures incentives are directly linked to the production capacity and incremental turnover of participating companies.

The incentives are provided over a duration of 4 to 6 years, depending on the specific sector. This long-term support encourages companies to make sustained investments in their manufacturing capabilities. Financial support under the PLI Scheme includes significant budget allocations across various sectors to enhance technological capabilities and innovation.

In the renewable energy sector, for instance, incentives under the PLI Scheme aim to enhance the competitiveness of domestic solar manufacturers in the global market. Such targeted financial incentives drive investment and innovation, fostering a dynamic and competitive industrial environment.

Sector-Specific PLI Schemes

The Production Linked Incentive (PLI) Scheme is a focused initiative aimed at boosting manufacturing across various key sectors in India. It is designed to attract both domestic and foreign investments by providing financial incentives to manufacturers. The scheme includes specific sectors such as electronics, pharmaceuticals, and renewable energy to enhance capabilities and competitiveness.

These sector-specific initiatives are tailored to address the unique challenges and opportunities within each industry. This ensures that companies incentives are effectively utilized to drive growth, innovation, and job creation.

Electronics Manufacturing

The PLI Scheme has been specifically designed to boost mobile manufacturing and related component production in India. This focus on enhancing the manufacturing landscape for mobile phones encourages investment and innovation, resulting in increased production capacity and job creation.

A leading electronics manufacturer utilized the PLI Scheme to diversify its product range, leading to a substantial rise in market share both domestically and internationally. Such success stories highlight the scheme’s potential to transform India’s electronics manufacturing sector and integrate it into global supply chains.

Pharmaceuticals and Medical Devices

The PLI Scheme focuses on bolstering the domestic manufacturing of pharmaceuticals, especially bulk drugs and essential medical devices. Increasing the production of active pharmaceutical ingredients and medical devices strengthens India’s healthcare sector and reduces import dependency.

A pharmaceutical company benefited from the PLI Scheme by modernizing its facilities, which resulted in improved production efficiency and increased compliance with international standards. This not only enhanced the company’s competitiveness but also contributed to the overall growth of the pharmaceutical industry in India.

Renewable Energy and Solar PV Modules

The PLI initiative promotes the manufacturing of solar PV modules, aiming to increase India’s renewable energy capacity. By actively promoting the production of solar photovoltaic modules, the scheme advances the renewable energy sector and decreases reliance on imports.

A renewable energy firm expanded its manufacturing capabilities under the PLI Scheme, enabling it to become a key player in the solar PV market. This expansion not only supports India’s green energy goals but also fosters technological advancements and job creation in the renewable energy sector.

Impact on Domestic Manufacturing and Employment

Significant Investments: The PLI Scheme has attracted actual investments totaling ₹1.46 lakh crore as of August 2024, with forecasts suggesting that investments will soon exceed ₹2 lakh crore.

Robust Sales Growth: The scheme has generated sales of around ₹14 lakh crore, reflecting the substantial increase in domestic production.

Job Creation: Over 11.5 lakh jobs have been created both directly and indirectly, with advancements in various industries expected to generate around 12 lakh jobs in the near future.

Shift to High-Value Exports: India’s exports have transitioned from traditional commodities to high-value products like electronics and pharmaceuticals, enhancing the country’s role in global value chains.

Support for MSMEs and Startups: The scheme has encouraged the establishment of manufacturing units by MSMEs and startups, promoting local industry growth and reducing the country’s reliance on imports.

Strengthening Industrial Base: This comprehensive impact underscores the transformative potential of the PLI Scheme in strengthening India’s industrial base and economic resilience.

Case Studies of Successful Implementation

Electronics Sector Expansion: Several companies have successfully leveraged the PLI Scheme to expand their production facilities, resulting in a significant increase in large scale electronics manufacturing, mobile phone manufacturing, and active component manufacturing.

Pharmaceutical Sector Growth: Companies in the pharmaceutical industry have scaled up production of essential medicines and bulk drugs, improving domestic supply and boosting export opportunities, thereby strengthening India’s position as a leading pharmaceutical producer.

Renewable Energy Capacity Enhancement: Firms involved in solar PV module manufacturing have increased their production capacity due to incentives provided under the PLI Scheme, demonstrating the scheme’s role in promoting industrial growth and innovation.

Global Market Integration: These success stories collectively highlight the effectiveness of the PLI Scheme in fostering industrial growth, technological advancement, and integration into global markets.

Challenges and Criticisms

1. WTO Regulations Constraint: WTO regulations limit India’s ability to link PLI subsidies with domestic value addition, which impacts the overall effectiveness of the scheme.

2. Transparency Issues: The incentive distribution process under the PLI Scheme lacks transparency and clear criteria, raising concerns about fairness among stakeholders.

3. Delays in Disbursal: There have been delays in the timely disbursal of incentives, causing difficulties for companies relying on these funds for operational expansion.

4. Complex Compliance Requirements: The scheme involves complex compliance and documentation requirements, which can be challenging for companies, especially smaller enterprises.

5. Limited MSME Access: Some sectors under the PLI Scheme have limited access for MSMEs, restricting their participation and benefits from the program.

6. Risk of Dependency: There is a risk that companies may become dependent on incentives rather than focusing on sustainable growth and competitiveness.

Addressing these challenges is crucial for enhancing the PLI Scheme’s effectiveness and ensuring equitable benefits for all stakeholders.

Future Prospects and Expansion Plans

Sectoral Expansion: The PLI Scheme is poised to extend its reach into new and emerging sectors beyond electronics and manufacturing, targeting industries with high growth potential to diversify India’s industrial base.

Enhanced Investment Attraction: With proven success in attracting significant investments, the scheme aims to further incentivize both domestic and foreign companies to invest in large-scale manufacturing units across varied sectors.

Technological Innovation: Future plans include promoting advanced technologies and high-tech industries through the scheme, fostering innovation and adoption of cutting-edge manufacturing processes.

Increased Employment Opportunities: Expansion of the scheme is expected to generate more employment, creating jobs across different skill levels and contributing to inclusive economic growth.

Strengthening Global Competitiveness: By continuously improving domestic manufacturing capabilities, the PLI Scheme seeks to enhance India’s position in global markets and supply chains.

Sustainability Focus: Upcoming phases may incorporate sustainability and green manufacturing practices, aligning with global environmental standards and promoting renewable energy sectors.

Support for MSMEs and Startups: Future iterations of the scheme aim to increase accessibility and benefits for MSMEs and startups, fostering entrepreneurship and local innovation.

Policy and Regulatory Improvements: The government plans to streamline compliance and enhance transparency to address current challenges, ensuring smoother implementation and greater stakeholder confidence.

Long-Term Economic Impact: The sustained success and expansion of the PLI Scheme are expected to contribute significantly to India’s economic resilience, self-reliance, and industrial growth in the coming decades.

Summary

In summary, the Production Linked Incentive (PLI) Scheme represents a monumental step towards bolstering India’s manufacturing sector and achieving self-reliance. By offering targeted incentives and fostering a conducive environment for investments, the scheme aims to transform India into a global manufacturing powerhouse. The PLI Scheme’s impact on job creation, technological advancements, and global market presence underscores its significance in India’s economic strategy.

We encourage businesses to explore the vast opportunities presented by the PLI Scheme, apply for the incentives, and download our eBook for detailed guidance. Together, we can drive India’s economic growth, create jobs, and enhance our global competitiveness.

Frequently Asked Questions

Who is eligible for the PLI scheme?

Only companies registered in India that are involved in manufacturing goods within designated sectors qualify for the PLI scheme.

Can MSMEs benefit from PLI?

Yes, MSMEs can benefit from the PLI Scheme by scaling their operations and enhancing their global competitiveness. This initiative provides them with opportunities to thrive in a dynamic market environment.

Is the PLI scheme a grant or a loan?

The PLI scheme offers financial incentives based on incremental sales rather than functioning as a grant or a loan.

How much incentive can I expect?

You can expect incentives under the PLI Scheme to range from 4% to 6% based on the value of your incremental sales over the base year.

Can I apply for multiple sectors?

Yes, you can apply for multiple sectors under the PLI Scheme, as long as you meet the specific eligibility criteria for each sector.