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EconomySchemes2020

Production Linked Incentive schemes

Incentives on incremental sales in selected manufacturing sectors.

Written by Pratidin; every fact checked by a separate review before publishing. How we work

Run across several ministries; began with large-scale electronics.

Practise this in the app: flashcards, quiz and a timed answer
Prelims

Quick recall

When did PLI start?
2020, with large-scale electronics.
How many sectors are covered?
14.
What is the approximate total outlay?
About ₹1.97 lakh crore.
What is the incentive based on?
Incremental sales over a base year.
Which sector is the clearest success?
Mobile phone manufacturing.
What is a key criticism?
Low domestic value addition in assembly.

Asked before in UPSC

Recurring theme: Manufacturing competitiveness and industrial policy

Mains
  1. 2025 · GS3 · 15 marks

    Discuss the rationale of the Production Linked Incentive (PLI) scheme. What are its achievements? In what way can the functioning and outcomes of the scheme be improved?

    A direct PLI question: cite sectors covered, electronics and pharma gains, and slow disbursal in other sectors.

  2. 2025 · GS3 · 15 marks

    India aims to become a semiconductor manufacturing hub. What are the challenges faced by the semiconductor industry in India? Mention the salient features of the India Semiconductor Mission.

    Semiconductor incentives extend the PLI logic of fiscal support for strategic manufacturing.

  3. 2023 · GS3 · 10 marks

    Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard.

    PLI is the flagship of current manufacturing policy; note critiques that it favours large firms over MSMEs.

  4. 2017 · GS3 · 15 marks

    "Industrial growth rate has lagged behind in the overall growth of Gross-Domestic-Product(GDP) in the post-reform period" Give reasons. How far the recent changes is Industrial Policy are capable of increasing the industrial growth rate?

    PLI is the later answer to the lagging industrial share this question describes.

  5. 2014 · GS3 · 12.5 marks

    Normally countries shift from agriculture to industry and then later to services, but India shifted directly from agriculture to services. What are the reasons for the huge growth of services vis-a-vis industry in the country? Can India become a developed country without a strong industrial base?

    PLI is an attempt to build the missing industrial base and global value chain links.

Prelims
  1. 2023 · Prelims

    Consider the following statements: Statement-I: India accounts for 3.2% of global export of goods. Statement-II: Many local companies and some foreign companies operating in India have taken advantage of India's 'Production-linked Incentive' scheme. Which one of the following is correct in respect of the above statements?

    Direct Prelims reference to PLI uptake by domestic and foreign firms.

The basics

Why it matters

Production Linked Incentive schemes pay manufacturers a percentage of their incremental sales, to attract large-scale investment in chosen sectors. Started in 2020, they now cover 14 sectors.

14
Sectors covered by PLI schemes
From mobile phones to pharmaceuticals.

How PLI pays

Incentives follow output, not just investment.

PLI mechanism
  1. 1ApplyFirm commits investment and sales.
  2. 2Base yearSales measured against a base.
  3. 3ProduceFirm raises incremental sales.
  4. 4IncentiveA percentage of incremental sales paid for set years.

You now know

  • PLI started in 2020 with large-scale electronics.
  • Covers 14 sectors with a combined outlay of about ₹1.97 lakh crore.
  • Pays incentives on incremental sales over a base year.
  • Mobile phones are the biggest success so far.

Go deeper

In one line: PLI pays for production to kick-start manufacturing in chosen sectors.

Why it matters for UPSC

It is the main tool of India's Industrial policy.

The core idea

Paying on output rewards firms that actually produce. The risk is paying for assembly without deep Domestic value addition.

Where to go next

In one line: PLI's results vary by sector.

Successes

Mobile phones and pharmaceuticals intermediates.

Weak areas

Slow disbursement in some sectors, and assembly-led output. Domestic value addition requirements and component schemes aim to fix this within India's Industrial policy.

Where to go next

Industrial policy

How governments shape industry

In one line: Industrial policy is government action to shape which industries grow.

Tools

Subsidies, tariffs, public investment and incentives such as PLI.

Debate

Picking winners versus fixing market failures.

Where to go next

Domestic value addition

Share of value created in India

In one line: Domestic value addition is the share of a product's value created within the country.

Why it matters

Assembly of imported parts adds little value and few skilled jobs.

Policy

Phased manufacturing programmes and component incentives.

Where to go next

Prelims-style quiz

  1. PLI incentives are linked to:

    1. R&D spending
    2. Exports only
    3. Employment only
    4. Incremental sales
    Show answer

    Answer: (d) Incremental sales. Incremental sales over a base year.

  2. Consider the following:
    1. PLI schemes cover 14 sectors.
    2. PLI began with large-scale electronics.
    Which of the statements given above is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Show answer

    Answer: (c) Both 1 and 2. Both correct.

  3. The biggest PLI success so far is in:

    1. Textiles
    2. Mobile phones
    3. Specialty steel
    4. Drones
    Show answer

    Answer: (b) Mobile phones. Mobile phones.

  4. A common criticism of PLI is:

    1. No investment
    2. Too much domestic value addition
    3. Low domestic value addition
    4. No exports
    Show answer

    Answer: (c) Low domestic value addition. Assembly-heavy output.

Syllabus

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