Govt decision to limit PLI scheme signals manufacturing setback: Cong

The Indian government’s recent decision to discontinue the $23 billion Production-Linked Incentive (PLI) scheme beyond the initial 14 sectors has sparked widespread concern over the future of the country’s manufacturing ambitions.

The announcement has raised questions about India’s ability to reduce dependence on China and boost manufacturing’s share of GDP to 25 per cent.

According to Congress spokesperson Pawan Khera, who shared the information on X, the PLI scheme, initially aimed at transforming India into a global manufacturing powerhouse, has failed to meet its targets. Contrary to expectations, the manufacturing sector’s share of GDP has declined from 15.4 per cent to 14.3 per cent instead of increasing.

As of October 2024, firms under the PLI scheme produced goods worth only $151.93 billion — merely 37 per cent of the target. Of the total allocated funds, only $1.73 billion, or 8 per cent, have been disbursed. Several firms failed to commence production, while others faced significant delays in receiving subsidies.

Sectors such as steel, textiles, and solar panels have particularly struggled to meet expectations, hindered by fierce competition and non-compliance with investment norms.

In the solar industry, 8 out of 12 PLI-approved companies, including major players like Reliance, Adani, and JSW, are unlikely to meet their targets. Similarly, the steel sector witnessed the withdrawal of 14 out of 58 projects owing to lack of progress.

The decision not to extend the PLI scheme has hit the micro, small, and medium enterprises (MSMEs) hard, as they form the backbone of India’s manufacturing ecosystem. Khera pointed out that the shutting down of MSMEs and the failure to achieve ‘Make in India’ goals signal the government’s inability to shift from an agriculture-driven economy to a manufacturing-oriented one.

Khera further warned that India might soon face an ageing population crisis, with the demographic dividend slipping away. He emphasised the urgency of taking corrective measures to revive the manufacturing sector before the country loses a crucial economic advantage.

As stakeholders continue to assess the fallout from the decision, the need for a comprehensive reassessment of India’s manufacturing strategy has become more pronounced.