There has been talk and much celebration on the size and critical growing mass of India’s economic landscape. A few of us have remained sceptical on the composition, and distributive effects of this bloated chest-thumping, which merits deeper, more structural answers.
We discuss the manufacturing story here, under the Modi Government’s grand aspiration for enabling producers to Make in India.
When India launched its $23 billion Production Linked Incentive (PLI) scheme in 2020, it was meant to be the great leap forward that would finally establish the country as a global manufacturing hub.
Five years later, the bitter truth stares us in the face: while the world raced ahead, India’s grand industrial policy experiment has delivered little more than half-measures and hollow victories. The numbers don’t lie and when we delve deep in the manufacturing’s share of GDP, it has actually shrunk from 15.4 percent to 14.3 percent from the originally promised 25 percent target.
Only 37 percent of production goals were met and a paltry 8 percent of incentives actually reached businesses. This isn’t just any other policy underperformance; it’s a systemic failure that demands urgent reckoning.
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Look at what real success looks like. Vietnam, with a fraction of India’s resources, attracted more than $36 billion in FDI last year alone by offering streamlined approvals and reliable infrastructure.
China’s Pearl River Delta transformed from farmland to the world’s factory floor in two decades through coordinated policy and massive skills investment. Even Bangladesh has outpaced us in textile manufacturing through consistent policy support. Yet India, with all its potential, has managed to create a scheme where some 94 percent of benefits flowed to just two sectors while others floundered in bureaucratic limbo.
The human cost of this failure is staggering. Where are the promised jobs? In mobile manufacturing, a supposed PLI success story where only four percent of projected employment materialised.
Pharmaceutical firms pocketed incentives while creating just 13 percent of expected jobs. This scheme has therefore turned into a corporate welfare masquerading as an economic policy. It’s architects seem to have forgotten that manufacturing revolutions aren’t built on subsidies alone, but on ecosystems of skills, infrastructure, and efficient governance.
Export Numbers vs Real Gains
Perhaps most damning is the value addition farce. While we celebrate Apple assembling iPhones in India, 85 percent of their components still come from China. Our much-touted 15-20 percent value addition in smartphones pales against China’s 45 percent or Vietnam’s 30 percent.
We’ve become glorified assemblers, while the real manufacturing wealth flows overseas. The PLI scheme, in its current form, is essentially subsidising foreign companies to use India as a low-value packaging station.
The opportunity costs are staggering. The $10 billion earmarked for semiconductor subsidies could have transformed hundreds of universities around the country or built entire an entire industrial township. Instead, we’re left with half-built chip plants and broken promises. As other nations invest in future-ready skills and smart infrastructure, we’re stuck in a self-destructive loop of delayed approvals and missed targets.
This paints a staggering picture of India’s chronic inability to learn from global peers while repeating the same policy mistakes. The PLI story exposes our fatal attraction to grand announcements over gritty execution, and corporate giveaways over ecosystem building.
As the scheme winds down without achieving its core objectives, we must ask: will India ever move beyond hollow promises to deliver real manufacturing transformation? The world isn’t waiting for us to figure this out – it’s moving ahead, with or without our participation.
How Sectoral Failures Reveal Systemic Flaws
Beneath the surface of India’s celebrated smartphone export boom lies an uncomfortable reality that exposes the structural weaknesses of the PLI scheme. While mobile phone exports surged to $49.16 billion, this apparent success masks deeper failures, only 4 percent of promised jobs materialised.
As the Global Trade Research Initiative (GTRI) highlights, both India and China earn merely $30 per assembled iPhone, less than 3 percent of the device’s retail price.
This paltry value capture reveals that India’s role remains confined to low-margin assembly work, with the lion’s share of profits flowing back to foreign firms as royalties and imported part costs.
The pharmaceutical sector underscores another critical flaw in PLI’s design: its inability to distinguish between sectors needing genuine support and those already competitive. Despite India’s established position as the “pharmacy of the world,” the scheme channelled 107 percent of expected investments into the sector while generating just 13 percent of targeted jobs.
Net exports remained flat and proving PLI was subsidising existing strengths rather than building new capabilities. Similar missteps plagued food processing, where firms met production targets but faced subsidy denials over bureaucratic technicalities; and textiles, where technical textile investments failed to gain meaningful traction due to structural disadvantages against global competitors.
The scheme’s most spectacular failures emerged in capital-intensive sectors that required long-term ecosystem development. Solar panel manufacturers, including major players like Adani and Reliance, are set to miss targets. Some haven’t even ordered critical equipment years into the program.
The semiconductor push proved particularly illusory; of the $31 billion committed with absolutely no fabrication plant in sight. These shortcomings stand in stark contrast to Vietnam’s success in attracting $36 billion in electronics FDI by offering streamlined approvals, reliable infrastructure, and policy consistency, elements sorely lacking in India’s implementation.
PLI’s Fundamental Flaws
Three fundamental flaws doomed the PLI experiment from the outset.
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First, bureaucratic inertia paralysed disbursements, only Rs 2,900 crore of the Rs 1.97 lakh crore allocated reached beneficiaries by FY23, with firms like Foxconn facing delays in incentive payouts.
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Second, the scheme’s metrics prioritised quantity over value addition, creating perverse incentives for firms to import nearly complete kits, conduct final assembly, and claim subsidies without developing local supply chains.
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Third, PLI ignored the global competitive landscape, failing to address India’s crippling disadvantages in logistics costs, power reliability, and skilled labour availability.
The human and economic costs of these failures are staggering. India is left with half-built factories, unmet employment promises, and a manufacturing strategy that prioritised headlines over holistic development.
As the debate over PLI’s legacy continues, one truth becomes undeniable: sustainable industrial growth requires more than financial incentives, it demands an ecosystem approach that addresses India’s foundational competitiveness gaps.
This reckoning leads inevitably to the pivotal question: What has PLI truly achieved, and at what opportunity cost? While the scheme’s defenders cite export figures, these metrics obscure the troubling realities of jobless growth, import dependence, and misallocated resources, a sobering reminder that manufacturing transformation requires more than subsidy checks and press releases.
What Has PLI Achieved, and At What Cost?
tale of two economies – one of glittering export figures, the other of hollowed-out domestic value. Nowhere is this contradiction more evident than in mobile manufacturing, the scheme’s much-touted crown jewel.
While exports have reportedly neared $50 billion, the reality shows alarming fragility: industry sources indicate a handful of major assemblers dominate production, with even committed players like Wistron ultimately exiting India despite initial PLI participation. Apple’s flagship Tata-Wistron expansion has stalled amid subsidy delays, while the Taiwanese firm’s complete withdrawal sounds a particularly damning alarm about long-term investor confidence
Even more revealing is what India retains from this export boom. Industry estimates suggest the majority of value in smartphone exports quickly leaves the country – spent on imported components or repatriated as profits by foreign firms. What remains are predominantly low-margin assembly jobs with limited skill development or domestic supply chain growth. The much-touted “value chain advancement” rings hollow when critical components and intellectual property remain firmly anchored abroad.
Export performance across PLI sectors paints a similar picture. While PLI schemes contributed Rs 4 lakh crore in export value, far exceeding expansion in non-PLI industries, this gap narrows substantially when import surges are factored in.
The core design flaw, rewarding gross production rather than domestic value addition, has had the unintended consequence of subsidising global supply chains, rather than strengthening India’s own. Consider pharmaceuticals: despite billions in allocated subsidies, the sector’s net trade position remained flat, suggesting PLI payouts often funded activity that would have occurred regardless.
Distress Signals
But perhaps the most profound cost of the scheme is what India gave up in its pursuit: its alternative futures. The $10 billion allocated to semiconductor subsidies, for example, could have funded 500 engineering colleges at NIT standards, helping address the acute shortage of trained technicians and engineers.
It might have also been used to modernise power and logistics infrastructure across India’s key industrial clusters, boosting productivity across sectors without picking winners. Instead, the money was poured into capital-intensive dreams like chip fabs, a sector so complex that even China, with over $150 billion in subsidies, continues to struggle.
This brings us to a deeper truth: India’s manufacturing problem was never just about incentives, it was about foundations. Rather than paying firms to operate here, the government must make India a place where firms want to build.
This means reliable electricity, modern freight networks, transparent regulation, and vocational training that matches industry needs. Countries that succeeded in manufacturing, from Japan in the 1960s to Vietnam today, focused not on subsidies, but on removing frictions and building ecosystems.
PLI’s early years and evidence now available offer a sobering lesson for not just on India’s suboptimal manufacturing landscape but also on the policy ecosystem that kept the government pumping money into a scheme (at the cost of essential welfare expenditure) which hardly caused a direct, major productive shift.
A handful of sectors may have seen temporal gains in production and export-linked growth, but these came at a steep price: distorted priorities, missed opportunities, and a growing disconnect between output and actual progress.
Indian economy doesn’t just need more manufacturing, it needs the right kind mapped with domestic need/demand and incentivised through its MSME infrastructure. A system of interventions conceptualised in that regard can’t be bought with subsidies alone.
(Deepanshu Mohan is a Professor of Economics, Dean, IDEAS, Office of Inter-Disciplinary Studies, and Director of Centre for New Economics Studies (CNES), OP Jindal Global University. Ankur Singh is a Research Assistants with Centre for New Economics Studies (CNES) and members of the InfoSphere team. This is an opinion piece. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)
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