Critically evaluate the PLI scheme as an instrument of industrial policy.

Launched in 2020 and extended to 14 sectors, the Production Linked Incentive (PLI) scheme is the principal tool of the Make in India initiative begun on 25 September 2014 across 25 focus sectors [5]. By paying firms for incremental output rather than subsidising inputs, it marks a genuine design advance — yet its results are uneven.

Merits as an industrial policy instrument

• Outcome-linked design: incentives accrue only on realised production, so fiscal exposure is self-limiting and no permanent tariff protection is required — 836 applications stand approved [1].
• Measurable investment pull: cumulative investment of ₹2.16 lakh crore, production of ₹20.41 lakh crore and exports of ₹8.3 lakh crore up to December 2025 [1].
• Anchor-firm effect: it drew global lead firms into electronics, building scale and reducing import dependence in strategic sectors [1].
• Employment: over 14.39 lakh direct and indirect jobs [1].

Critical limitations

• Concentration of gains: disbursals are skewed — about ₹15,554 crore to electronics against ₹2,377.56 crore for the entire automobile sector [2]; the scheme largely rewards firms already best placed to scale.
• Shallow value addition: incentives reward assembly, while high-value components remain imported, so export volumes rise without a commensurate rise in manufacturing's share of GVA.
• Jobs–output mismatch: the chosen sectors are capital-intensive, whereas the Economic Survey 2016-17 identified apparel and leather as India's real route to large-scale low-skill employment [3].
• Policy incoherence: high and fragmented duties on intermediates raise input costs; the Economic Survey 2025-26 urges a shift from import substitution towards global value chain integration [4].
• Time-bound support ends before deep component ecosystems mature.

PLI is thus a competent but partial instrument — effective at mobilising capital in a few sectors, insufficient by itself to alter the structure of Indian manufacturing. Pairing it with tariff rationalisation on intermediates and capital goods, component-level incentives, and state-led land and labour deregulation can convert assembly into genuine manufacturing depth.