Cluster-based manufacturing zones combined with output-linked incentives are India's emerging template for sectoral industrial policy. Examine this with reference to the Khelo India Sports Goods Manufacturing Scheme.

India's industrial policy is moving from tariff protection to a "zone-plus-incentive" model. Firms are grouped in shared clusters and paid only after they show verified output. The Cabinet-approved Khelo India Sports Goods Manufacturing Scheme (KISGMS) has an outlay of Rs.1,856.67 crore for 2026 to 2033-34 [1]. It applies this template to a sector that holds only about 0.5% of global equipment exports [2].

How KISGMS reflects the template

• Cluster: Sports Goods Manufacturing Zones (SGMZs) place manufacturers, suppliers, testing labs and design centres together. They are built on existing BHAVYA and NICDC parks, not on new land [1].
• Output-linked incentive: Anchor Investment Support and Turnover Linked Support together get Rs.1,130 crore. Turnover Linked Support rewards production growth, PLI-style [1].
• Convergence: R&D comes through ANRF, start-up support through Startup India, skilling through MSDE and branding through the Export Promotion Mission [1].

Strengths

• Fiscal prudence: Public money is paid out only after firms show higher sales.
• Quality: Rs.105 crore helps firms get certified by International Sports Federations. This tackles a non-tariff barrier to exports [1].
• Jobs and exports: The sector is labour-intensive. NITI Aayog targets equipment exports rising from $275 million to $8.1 billion by 2036 [2].

Limitations

• Bias towards big firms: About 61% of the outlay goes to anchor and turnover support. Yet most production comes from micro and small firms in Meerut and Jalandhar [1][2].
• Location mismatch: New zones in BHAVYA/NICDC parks may bypass these traditional clusters.
• Slow payouts: PLI schemes across 14 sectors had paid out only ₹28,748 crore of a ₹1.91 lakh crore outlay by December 2025 [3]. The CAG found that approvals under an earlier MeitY incentive scheme took 491 days against 185 expected [4].
• Missed targets: PLI for IT hardware 2.0 met only about 3% of its production target [5].
• Small scale: The scheme averages about Rs.230 crore a year. Its success also depends on partner schemes giving sports goods priority.

Way forward

• Reserve a share of the money for MSMEs, or set lower qualifying thresholds for them.
• Fix deadlines for settling claims and keep the guidelines stable.
• Link the first SGMZs to Meerut and Jalandhar, which NITI Aayog recommends modernising [2].

KISGMS shows the template is now in use: clusters for scale, output incentives for accountability and convergence for cost-efficiency. It should be judged by how much private investment it attracts and how many small firms it upgrades, not by how much it spends. A design that includes small firms and sets clear deadlines would serve Atmanirbhar Bharat and SDG 8 (decent work and economic growth).