India factories end bid to rival China

Delhi spent less than 8% of allocated funds

- SARITA CHAGANTI SINGH SHIVANGI ACHARYA

Indian Prime Minister Narendra Modi’s government has decided to let lapse a $23-billion programme to incentivise domestic manufacturing, four years after it launched the effort to woo firms away from China, according to four government officials.

The scheme will not be expanded beyond the 14 pilot sectors and production deadlines will not be extended despite requests from some participating firms, two of the officials said. Some 750 companies, including Apple supplier Foxconn and Indian conglomerate Reliance Industries, signed up to the Production-Linked Initiative (PLI) 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 scheme 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 programme, or 37% of the target that Delhi had set, according to an undated analysis of the scheme compiled by the commerce ministry. India had issued just $1.73 billion in incentives, or less than 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 programme, 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%.

Foxconn, which now employs thousands of contract workers in India, and Reliance didn’t return requests for comment.

'MISSED OPPORTUNITY'