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In 2014 the NDA government launched its flagship Make in India programme for transforming India into a global manufacturing hub. The idea was to encourage both domestic and foreign companies to manufacture in India, create jobs and raise the share of manufacturing to 25 per cent of GDP, by focussing on 25 key sectors of the economy. Soon afterwards, the Design in India programme was launched to encourage indigenous product development through innovation and cutting-edge R&D. The government then thought to provide incentives to both the programmes; hence, Production Linked Incentive (PLI) and Design Linked Incentive (DLI) schemes were launched in 2020 and 2021 respectively, as part of the Atmanirbhar Bharat package. With an outlay of ₹1.97 lakh crore, PLI sought to enhance domestic manufacturing capacity, reduce imports, and increase exports while DLI, with an outlay of ₹1,000 crore, sought to promote indigenous semiconductor design to boost our start-up ecosystem. PLI provides 4-6 per cent incentives on incremental sales over the base year, while DLI allows financial incentives up to 50 per cent of eligible R&D expenses capped at ₹15 crore, and 4-6 per cent incentive on net sales, to feed innovative chip designs into the manufacturing ecosystem that the PLI and India Semiconductor Mission (ISM), also launched in 2021, were supposed to create. With a total outlay of ₹76,000 crore (about $9 billion), ISM aimed at comprehensive development of the semiconductor ecosystem, including design, fabrication, and manufacture. PLI and DLI were envisaged to be complementary to each other, but both remain bedevilled by structural design flaws and institutional weaknesses. Low-value assembly Initially targeting mobile phones, PLI attracted some global players like Apple’s suppliers Foxconn, Pegatron, Wistron which significantly boosted smartphone exports, from $3 billion in FY20 to over $15 billion in FY25, but with little value addition or technology transfer. With actual value addition around 18-20 per cent, far below the targeted 35-40 per cent by 2026, India still remains a low-value assembly hub, far from an electronics manufacturing powerhouse that the schemes wanted it to be; our share of manufacturing is still around 17 per cent, as in 2020. Most high-value components — chips, displays, sensors, and PCBs — are still imported from China, Vietnam, and South Korea. Though intended to cover 14 sectors, 80 per cent of PLI incentives have been cornered by a few large mobile manufacturers, while sectors like IT hardware, telecom, solar, auto components, and white goods, etc. show very little progress and underutilisation of funds. Till July 2025, only ₹21,689 crore, or less than 11 per cent of total PLI outlay, could be disbursed. As regards employment, as against the target of 16.2 lakh direct jobs, the actual achievement was only 5.84 lakh (June 2024). One reasons was that the incentives were not linked to wages. Similarly, the DLI’s impact has also been minimal so far. A major problem is its scale; ₹1,000 crore is negligible compared to requirement. Even the ISM outlay pales into insignificance compared to what other countries are spending on semiconductor support — the US CHIPS and Science Act, 2022, earmarked $52 billion for the sector for the next five years, while China has spent over $150 billion since 2014. Like our AI investments, this also remains symbolic rather than transformative in scale. The institutional support ecosystem remains weak and ineffective, and there is no structured pathway for scaling and commercialising products or accessing venture capital, or linking to manufacturing partners under PLI/ISM. Lacking synergy As of July 2025, only 23 projects have been sanctioned for a total of ₹803 crore; disbursement figures are unknown. Synergy between PLI, DLI and ISM is missing — PLI and DLI tend to operate in silos with very limited vertical linkage through ISM. Implementation remains fragmented across agencies, with no clear roadmap for development of a component ecosystem, and there is a skill gap in advanced chip design and testing. PLI cannot fix our land, labour and logistics constraints like high electricity costs, port delays, and regulatory compliance. We can neither match China’s scale of subsidies and infrastructure or R&D incentives of South Korea. South Korea spends 5 per cent of GDP in R&D, the US nearly 4 per cent, China 3 per cent and India, a measly 0.6 per cent. India spends 3 per cent of GDP on subsidies, 2 per cent by the Centre — half of it to feed people who are not hungry. This, of course, excludes the electoral freebies. It needs many more linkages to make the schemes work, for example, by better aligning PLI with PM Gati Shakti, National Logistics Policy, and skilling programmes, by substantially scaling up R&D expenditure and integrating design, R&D and manufacturing, and most importantly, by bringing MSMEs within its scope. In their present form, the schemes lack depth and institutional coherence. The writer is Professor at the Arun Jaitley national Institute of Financial Management; and a former Director General from the Office of the CAG of India. Views expressed are personal Published on October 29, 2025
