A look at India’s PLI Scheme and what it means for you

Contributor - Pravash
March 21, 2024
8 min read

It is hard to not notice the rise of many electronic manufacturing firms along the Noida – Greater Noida – Yamuna Expressway belt. A movement of this nature can only be enabled by government schemes. As designers, product development professionals and brand marketers, we are acutely aware of the importance of the manufacturing sector and the schemes that incentivise its holistic development.

What are Production-Linked Incentive Schemes?

The escalating tech war between the US and China is prompting a global reassessment of supply chains. China, long the world’s manufacturing powerhouse, is experiencing a slowdown in its once-dominant hi-tech sector, with growth in 2023 dipping to a mere 2.7% – the lowest since 2018. This, coupled with geopolitical tensions, is driving a trend of “derisking” – a strategic shift away from overreliance on China. Governments worldwide are re-evaluating their supply chains and increasingly looking to diversify production hubs in South and Southeast Asia.

India is seizing this opportunity to propel its own manufacturing ambitions through the “Atmanirbhar Bharat” (Self-reliant India) initiative. A key pillar of this strategy is the Production Linked Incentive (PLI) Scheme, launched in March 2020. The PLI scheme offers financial incentives to companies willing to invest in and expand their hi-tech manufacturing capabilities in India. This initiative aims to achieve a two-fold objective: reducing dependence on foreign imports and bolstering India’s domestic technological prowess across critical sectors like textiles, agriculture, electronics, pharmaceuticals, and chemicals.

According to the State Bank of India, China accounted for a staggering INR 48.75 lakh crore (roughly $650 billion) of India’s imports in Fiscal Year 2021. Notably, nearly INR 3,950 crore ($5.3 billion) of these imports comprised commodities targeted by the PLI scheme. If successful in reducing India’s reliance on China by 20%, the PLI scheme has the potential to unlock an additional INR 6 lakh crore ($80 billion) for the Indian economy. If you’re looking at India as a potential market, it is crucial that you have a structured program to move your brand and business from design to production in India.

What does it mean for you?

Greater job opportunities: Expansion in manufacturing could lead to increased job openings for product and service-based employment, which means you will be able to have better opportunities.
Consumer benefits: Increased domestic production might lead to more affordable Indian-made goods cutting the cost of products.
Technological advancement: A focus on hi-tech manufacturing could drive R&D investment, benefiting Indian society in the long run.

How does the PLI scheme work?

In essence, it provides performance-based financial rewards to companies that increase their domestic manufacturing in strategic sectors. These incentives are based on exceeding production targets set against a baseline year. This structure encourages eligible companies to make investments in technology upgrades, capacity expansion, and overall manufacturing capability improvement. The program’s focus on volume growth has a dual benefit: stimulating job creation and strengthening domestic supply chains, which ultimately contributes to India’s GDP expansion.

Initially launched in 2020 to target mobile manufacturing, pharmaceuticals, and medical devices, the PLI scheme’s success has led to a significant expansion. In August 2023, the Indian government announced the program’s extension to encompass 14 critical sectors vital for the country’s economic growth and industrial competitiveness. This ambitious expansion is backed by a substantial INR 1.97 lakh crore (USD 26 billion) outlay, with projections indicating a potential five-fold increase in minimum production to a staggering INR 3.75 lakh crore (USD 26 billion) within the next five years. The PLI scheme is a cornerstone of India’s march towards a $5 trillion economy by unlocking its domestic manufacturing prowess. The potential benefits are multifaceted.

First, the scheme serves as a magnet for domestic and foreign investment in key sectors, fostering economic growth and industrial development.
Second, by incentivizing production for export, the PLI scheme aims to bolster India's export competitiveness, increasing its global trade share and reducing reliance on imports.
Finally, the program is expected to be a boon for employment, with projections suggesting the creation of a staggering 60 lakh (6 million) new jobs over the next five years.

Production Linked Incentive Schemes in India: Key Sectors

Where Bang Design has a deep contribution	Where Bang Design has a limited footprint
Mobile Device Manufacturing and Specified Electronic Components	Active Pharmaceutical Ingredients
Manufacturing of Medical Devices	Pharmaceuticals Drugs
Telecom & Networking Products	Specialty Steel
Electronic/Technology Products	Food Products
White Goods (ACs and LEDs)	Textile Products: MMF segment and technical textiles
Automobiles and Auto Components	Advanced Chemistry Cell (ACC) Battery
High-efficiency solar PV modules
Drones and Drone Components.

Assessing the PLI schemes performance

We get asked this a lot by potential customers and partners. How well has the scheme done since its inception?

The PLI scheme’s rollout coincided with the global upheaval caused by the COVID-19 pandemic. Lockdowns, supply chain disruptions, and economic uncertainty cast a long shadow. However, the PLI scheme, initially conceived as part of India’s broader manufacturing sector revival strategy, proved to be a crucial tool for pandemic recovery. While implementation delays pushed most schemes into effect only during 2021-22, early results are promising. As of November 2023, the program has attracted over INR 1.03 lakh crore in investments, spurred INR 3.20 lakh crore in exports, and created more than 6 lakh jobs (both direct and indirect).

The scheme’s reach extends beyond large corporations, with significant participation from Micro, Small, and Medium Enterprises (MSMEs). Additionally, the PLI scheme has demonstrably reduced India’s import dependence on raw materials in key sectors like pharmaceuticals. To fully gauge the program’s effectiveness, a closer look at the initial focus areas – electronic components manufacturing and pharmaceuticals – will be essential in the coming years.

Focus on Electronics Manufacturing

The PLI scheme for electronics capitalizes on the surging demand for technology and electronic devices, driving significant growth in India’s electronics manufacturing sector. Since its inception, major electronics players have announced plans to establish or expand manufacturing bases in India. This has triggered a profound transformation in the Indian manufacturing landscape, particularly in smartphone production, semiconductor fabrication, and electronic component creation. Notably, major Apple contract manufacturers like Foxconn, Pegatron, and Wistron have begun producing iPhones, iPads, and MacBooks within the country.

This shift has also spurred the establishment of semiconductor facilities, exemplified by the Vendanta-Foxconn collaboration in Gujarat. These developments solidify India’s position in large-scale electronics manufacturing. As a result of this transformation, the sector has attracted INR 4,784 crore in investments, contributing to a total production value of INR 2.04 lakh crore and INR 80,769 crore in exports (as of September 2022).

Furthermore, large-scale electronics manufacturing has emerged as a standout sector, creating 28,636 jobs and driving a 139% surge in smartphone exports. The PLI scheme’s allure, coupled with India’s vast consumer base and skilled workforce, presents a compelling proposition for multinational corporations seeking to expand their manufacturing footprint. This confluence of factors positions India as a rising global manufacturing powerhouse, poised for an era of innovation and industrial progress.

India's Manufacturing Ambitions: A Fast Work in Progress

India’s dream of becoming a global manufacturing giant has faced significant hurdles – fierce competition and structural roadblocks. The PLI scheme marks a bold attempt to revitalize this sector and propel India to the forefront of global manufacturing. By offering incentives for production, fostering innovation, and attracting investments, the scheme has the potential to trigger a new wave of industrial growth and economic prosperity. However, as India navigates the complex landscape shaped by the COVID-19 pandemic, the success of the PLI scheme will be paramount in achieving its vision of becoming a world-leading manufacturing hub.

Currently, the program faces challenges that hinder its smooth implementation and transparency. These include a lack of standardized criteria, an ambiguous reward system, and the absence of a centralized data hub. Another hurdle is the need to address supply chain issues and the cost of raw materials. For instance, container production in India is more expensive than in China due to the higher cost of corten steel, a key material. To ensure the PLI scheme’s long-term success and maximize its benefits, India will need sustained policy support, infrastructure development, and ongoing regulatory reforms.

It always starts with Design

The PLI scheme has been amended to prioritize and facilitate design-led manufacturers. If you’re just getting started in the product design process, Bang Design can help you through your journey.

Product Design: Design has a long tail manufacturing is ultimately controlled by decisions made at the design stage. Likewise, design itself must consider manufacturing strategy.

Product Engineering: Optimizing design and performance through advanced engineering. We help your product transition from idea through prototyping, testing and production.

Managed Production: Getting a manufacturer excited about your product is an often underestimated factor in your success. It pays to have someone in your corner who has built relationships with multiple manufacturers with PLI certificates, with ongoing business volume to support continued interest.

Pre-Launch and After: The journey doesn’t end at stabilizing production. Typical challenges are in:

1. Content supply for Growth Marketing
2. Product installations
3. Post-launch technical issues

We build dedicated teams to support your ongoing production liaison, marketing and sales.

Services

Product Design

Product Engineering

Services & Digital Design

Advanced 3D Surfacing

Creative Visualization

2D Configurator

3D Configurator

Immersive CX

Product Documentation

Brand Assets

Intelligent Sales

Micro Offshore Design

Managed Production

Agency Partner

Programs

Partner

Corporate Innovation

Launchpad

Small Business

21 day marketing

Design Exchange

Industries

Automobile Vehicle and mobility

Aviation

Agriculture and Construction

Consumer

Food and Beverage

Health And Life Sciences

Industrial and Capital Goods

Manufacturing

Technology

Marine

Space Exploration

Telecommunication