The Indian government, led by Prime Minister Narendra Modi, has opted to discontinue a $23 billion initiative aimed at boosting domestic manufacturing, just four years after its launch to attract companies away from China, according to four government officials. The program will remain limited to the original 14 pilot sectors, and production deadlines will not be extended despite requests from some participating companies, two officials confirmed.
Some 750 companies, including Apple supplier Foxconn and Indian conglomerate Reliance Industries, signed up to the Production-Linked Initiative scheme, public records show.
Firms were promised cash payouts if they met individual production targets and deadlines. The hope was to raise the share of manufacturing in the economy to 25% by 2025.
Instead, many firms that participated in the program failed to kickstart production, while others that met manufacturing targets found India slow to pay out subsidies, according to government documents and correspondence seen by Reuters.
As of October 2024, participating firms had produced $151.93 billion worth of goods under the program, or 37% of the target that Delhi had set, according to an undated analysis of the program compiled by the commerce ministry. India had issued just $1.73 billion in incentives – or under 8% of the allocated funds, the document said.
News of the government’s decision to not extend the plan and specifics about the lag in payouts are being reported by Reuters for the first time.
Modi’s office and the commerce ministry, which oversees the program, did not respond to requests for comment. Since the plan’s introduction, manufacturing’s share of the economy has decreased from 15.4% to 14.3%.
India’s $23 Billion Incentive Program to End Without Extension
India’s $23 billion manufacturing incentive program is set to lapse, with no plans to extend production deadlines or expand beyond the initial 14 sectors. While the scheme boosted pharmaceutical and mobile-phone production, other sectors like steel, textiles, and solar panels lagged behind due to stiff competition and missed targets. Excessive red tape and unmet investment thresholds hampered progress, prompting the government to explore alternatives like reimbursing plant setup costs.
Pharmaceutical exports and mobile production have surged, with India producing $49 billion worth of mobile phones in 2023-24. However, solar and steel projects saw significant shortfalls, with key companies like Adani and Reliance missing targets. The government has ruled out extending the scheme, emphasizing accountability and fairness for non-performers.