India winds down $23 bn initiative after struggling to counter China in manufacturing: Report

India is set to end its $23 billion Production-Linked Incentive (PLI) scheme after it failed to meet its objectives, Reuters reported on Friday. The initiative, introduced to attract firms away from China, aimed to increase manufacturing’s share in the economy to 25% by 2025. However, by October 2024, only 37% of the target had been met, with just $1.73 billion in incentives disbursed.

Challenges in implementation

Major companies such as Apple supplier Foxconn and Reliance Industries participated in the scheme, yet many firms struggled to achieve investment and production goals. While pharmaceuticals and mobile phone manufacturing showed growth, sectors like steel, textiles, and solar panels lagged behind. Complicated regulations and delays in government payments further hampered progress, Reuters said.

Key sectors fail to meet targets

In the solar sector, eight out of 12 companies, including Reliance and Adani, are unlikely to achieve their goals. Similarly, the steel sector suffered setbacks, leading to some projects being abandoned. Despite being aware of these issues, the government has opted not to extend the scheme, Reuters reported.

India’s manufacturing ambitions at risk

Experts told Reuters that India may have lost a crucial opportunity to establish itself as a global manufacturing hub. Instead of continuing the PLI scheme, the government is now exploring alternative industry support measures, such as reimbursing companies for factory setups. However, with intense competition from China and ongoing global trade challenges, India’s manufacturing future remains uncertain.