Production Linked Incentive schemes reward output rather than inputs. Evaluate the design changes in PLI-MD 2.0 and their likely impact on India's medical-devices import dependence.

A Production Linked Incentive (PLI) pays only for output that firms actually produce. Phase one of PLI-MD had an outlay of ₹3,420 crore [2], but only about ₹134 crore had been paid out by 2024–25 [3]. PLI-MD 2.0 (extended to 2035–36) [1] is a correction based on that experience. Its design is better, but on its own it will not end import dependence.

Design changes: merits

• Lower entry barriers: the minimum sales threshold is gone, the minimum investment is lower, firms can file several applications and the application window stays open [1].
• Segment-wise targeting: four Target Segments carry incentives of about 5–9%. TS2 (critical components) brings MSMEs into the supply chain [1].
• Deep-manufacturing focus: the new round targets 3T MRI, PET-CT and IVD analyzers, which are not yet made in India [1].
• Tapering rates push firms to become competitive, and with 3 years of gestation they have time to set up plants [1].

Design changes: limits

• Thin support: a 6% incentive for TS4 (assembly-only devices) must first offset an inverted duty structure, where parts pay more duty than imported finished devices [1][4].
• Scale risk: without a sales threshold, the money may spread across small units that never reach global scale [1].
• Missing metrics: the release reports production (over ₹16,000 crore) but gives no figure for domestic value addition or the fall in imports [1].

Likely impact on import dependence

• Positive: making high-end imaging and components at home can reduce reliance on imports of finished devices [1].
• Constrained: about 80% of devices sold in India are imported, and high-end imports kept rising despite PLI [4].
• Non-fiscal barriers: only 6 central testing labs exist, R&D spending is weak, and imported second-hand devices fall outside the Medical Device Rules, 2017 [4].
• Verdict: imports will fall moderately in targeted segments. Whether overall dependence falls depends on complementary reforms.

Overall, PLI-MD 2.0 makes the scheme easier to use, but cash for output cannot fix gaps in design, testing and tariffs. It should be paired with duty rationalisation, testing labs near industry clusters and segment-wise reporting of value addition, as the Standing Committee recommended [4]. Then it can genuinely advance Atmanirbhar Bharat in affordable healthcare.