Q12. Discuss the rationale of the Production Linked Incentive (PLI) scheme. What are its achievements? In what way can the functioning and outcomes of the scheme be improved?
Possible Introductions
Definitional framing:
The Production Linked Incentive (PLI) scheme, launched in 2020, provides performance-based financial incentives to firms for incremental production across key sectors. It aims to elevate manufacturing sector’s contribution to 25% of India’s GDP.
Contextual framing (India):
Given India's heavy reliance on imports and modest manufacturing share (~16%), PLI aligns with the vision of Atmanirbhar Bharat and targets critical sectors such as electronics, pharmaceuticals, automotive, and solar PV modules.
Sectoral framing:
India’s service sector has so far been the driver of growth, contributing more than 50% to the GDP. To promote more resilient and sustainable growth, manufacturing’s share must improve. The PLI scheme is a sincere effort in this direction by incentivising large-scale outcomes in key sectors.
Current affairs framing (data oriented):
As of mid-2025, projected investments under PLI have reached nearly ₹1.76 lakh crore, with incremental sales surpassing ₹16.5 lakh crore and over 12 lakh jobs created, signalling strong industry engagement.
Directive Analysis
“Discuss the rationale” → Explain the objectives behind PLI (manufacturing boost, import reduction, job creation, global integration).
“What are its achievements” → Use evidence (investments, production surge in electronics, pharma, etc.).
“How to improve” → Suggest strategies to address challenges and enhance outcomes.
Body of the Answer
1. Rationale Behind PLI Scheme
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- Rebalancing Growth: Strengthen the manufacturing base, which historically lagged behind services.
- Reducing Import Dependence: Target key imports like electronics, APIs, and solar modules.
- Improving Export Competitiveness: Incentivises scale, reduces costs, enhances global competitiveness.
- Driving Jobs & Investments: Encourages domestic and global firms to establish large-scale operations.
- Capitalising on Supply Chain Shifts: Positions India as an alternative to China amid global diversification.
X-Factor: PLI shifts from broad subsidies to output-linked incentives, aligning with WTO norms.
2. Key Achievements of the PLI Scheme
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- Industrial Investment & Production: Investments rose from ₹1.61 lakh crore (Nov 2024) to ₹1.76 lakh crore (Mar 2025).
- Sales & Economic Output: Beneficiaries recorded over ₹16.5 lakh crore in incremental sales.
- Job Creation: More than 12 lakh jobs generated across sectors.
- Electronics & Mobile: Production surged ~146%, making India a global leader.
- Pharmaceuticals: Shift from bulk drug imports to surplus, with strong domestic value addition.
- Solar PV Modules: Boosted capacity, reinforcing energy security and import substitution.
3. Suggestions for Improving PLI’s Effectiveness
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- Expand to Labour-Intensive Sectors: Strengthen MSME-led value chains for higher job impact.
- Promote Domestic Value Addition: Incentivise local sourcing of components, especially in electronics.
- Address Implementation Bottlenecks: Streamline disbursement and simplify reporting procedures.
- Ensure Regional Spread: Promote investments in underdeveloped states to avoid clustering.
- Support SMEs and Ancillaries: Lower eligibility thresholds, promote cluster-based support.
- Strengthen Monitoring: Independent audits and transparent real-time tracking.
- Link to Sustainability Goals: Add incentives for green tech adoption and circular practices.
- Facilitate Technology & Skill Development: Strengthen R&D, academia-industry linkages.
- Forge Global Partnerships: Tie PLI outcomes with FTAs to boost exports amidst de-globalisation.
Possible Conclusions
Future-oriented:
With enhancements, PLI can make India a global manufacturing hub, supporting sustainable growth and export competitiveness.
Policy-oriented:
PLI must be embedded with Make in India, Skill India, and MSME strategies for synergy.
Philosophical:
At its core, PLI marks India’s transition from dependence to self-reliance, turning industrial policy into an opportunity for renaissance.
