How the PLI Scheme Can Drive India's Economic Renaissance

The numbers tell a clear story: The initiative has brought in Rs 1.46 lakh crore in investments, created jobs for over 6 lakh people and added Rs 4 lakh crore worth of exports

India is set for a revolutionary leap in manufacturing, driven by forward-thinking policies and ambitious initiatives. Historically, the country’s manufacturing sector has faced challenges in achieving global competitiveness, with issues like high production costs, limited technological innovation and an over-reliance on imports hampering its growth potential. To overcome these challenges, the government introduced a transformative strategy to boost India's manufacturing capabilities—the Production Linked Incentive (PLI) scheme. Launched in November 2020, the PLI aims to incentivise manufacturers to boost production, enhance innovation and create a self-reliant economy by attracting large-scale investments and creating jobs.

So far, the scheme has brought in Rs 1.46 lakh crore in investments, created jobs for over 6 lakh people and added Rs 4 lakh crore worth of exports. These numbers tell a clear story that PLI is making a difference. But there’s still a lot more that can be done.

With the 2025 Union Budget coming up, the government has the perfect chance to take this scheme to the next level and make it even more helpful for the manufacturing sector.

What More Can Be Done?

This scheme has already turned India into the world’s second-largest mobile phone producer. But it’s not just about phones. Sectors like pharmaceuticals, automobiles, electronics and home appliances have also seen big boosts.

Now, experts believe it’s time to focus on industries that will shape the future, such as electric vehicles (EVs), renewable energy and even semiconductors. These are industries that can bring in more jobs, better technology and stronger exports for India.

The forthcoming budget presents an opportunity to amplify PLI’s influence across emerging sectors. Take, for instance, semiconductors. India spends $15bn each year importing semiconductors. If we make them here, it could save money and create 1.5 lakh high-paying jobs.

India sold 11 lakh EVs in 2023, up from just 3 lakh in 2021. PLI incentives could make EVs cheaper and more accessible for everyday buyers.

Additionally, India can drive global sustainability efforts by integrating green hydrogen technologies into the PLI framework, enhancing energy security and export potential. A Rs 20,000 crore incentive plan could position India as a leader in clean energy.

Extending PLI to defence and railways also aligns with the vision of Atmanirbhar Bharat. A robust defence manufacturing ecosystem could unlock multi-billion dollar export opportunities, while modernising the railways would position India as a global infrastructure leader.

Budget 2025 Wishlist

As we anticipate Budget 2025-26, here are some key areas that should be prioritised.

India spends around 0.65% of its GDP [gross domestic product] on research and development, far behind South Korea’s 4.3% or Israel’s 5.4%. The government could introduce a Rs 15,000 crore innovation fund to help companies and start-ups develop cutting-edge technologies. Collaborative projects between universities, start-ups and big companies could speed up breakthroughs in areas like renewable energy and artificial intelligence.

The next is building manufacturing hubs in smaller cities to spread economic opportunities more equitably. Developing infrastructure in Tier-II and Tier-III cities can help alleviate urban congestion while creating jobs outside major metropolitan areas.

India exported $447bn worth of goods in 2023-24. With better export incentives and faster customs clearances, this number could go up by 25% in just two years. Simplifying customs procedures and providing export incentives such as the RoDTEP [Remission of Duties and Taxes on Exported Products] scheme, can motivate more businesses to venture into international markets.

SMEs [small and medium-sized enterprises] employ over 11 crore people and contribute over 40% of the country’s exports, but many find it hard to take part in schemes like PLI due to complex paperwork. Simplifying processes and giving SMEs easier access to incentives can include more of them in the growth story.

Finally, integrating sustainability measures within PLI by promoting eco-friendly practices among manufacturers. Encouraging companies to adopt sustainable practices will not only benefit the environment but also appeal to increasingly conscious consumers.An example of this is Tata Motors, which aims to use 100% renewable energy in its operations by 2030.

A Vision for 2047

As India approaches 100 years of independence in 2047, the decisions we make today will shape the country’s future. By expanding the PLI scheme and focusing on innovation and sustainability, India can lead the world in manufacturing.

With this Budget, the government might also reopen some previous PLI schemes with higher incentives that have a larger influence on social and economic levels, such as auto and ACC batteries (the foundation of eco-mobility) and solar and pharma in light of the emergence of new viruses.

Finance Minister Nirmala Sitharaman has a unique opportunity to make this happen. With smart policies and bold steps, India can move closer to becoming a $10trn economy. The dream of a self-reliant and strong India is within reach and PLI is one of the key tools to achieve it.

The next steps are clear: make PLI bigger and better, support innovation and small businesses and focus on clean energy and future industries. Together, these efforts can create an India that is not just self-reliant but also a leader on the global stage. Let’s hope the 2025 Budget sets the stage for this bright future.

This article first appeared in Outlook India on 29 January 2025