The Pli Scheme At Year Four
India's Production Linked Incentive scheme, launched across 14 sectors between 2020 and 2021, committed approximately INR 1.97 trillion (roughly USD 24 billion) in performance-linked subsidies over five years. At year four the data is sufficient to assess which sectors have absorbed the scheme's intent and which have treated it as an unearned subsidy that distorts rather than develops.
The clearest success story is mobile phones and electronics components. Apple's supplier network anchored by Foxconn, Pegatron and Wistron expanded Indian assembly capacity from near-zero in 2020 to over USD 14 billion in exports by fiscal year 2025. The PLI incentive was a necessary but not sufficient condition: Apple's vendor qualification standards, India's labour cost advantage relative to China and Vietnam at the high-skill assembly tier, and the government's proactive resolution of infrastructure bottlenecks at specific industrial sites all contributed.
The worst performer is telecom and networking equipment, where domestic champions failed to reach the threshold production levels required to claim incentives. The scheme assumed competitive domestic manufacturers would emerge quickly; instead it revealed the depth of the technology gap between India's telecoms manufacturers and their Chinese and Korean counterparts.
Dispersion Across Sectors
The desk mapped PLI performance across all 14 sectors against three metrics: incentive claims as a percentage of maximum available, actual output growth relative to pre-PLI baseline and export share gained.
Mobile phones and electronics: claims 78 percent of maximum, export growth 340 percent, WINNER
Pharmaceuticals API: claims 65 percent, export growth 42 percent, WINNER
Medical devices: claims 55 percent, export growth 38 percent, MODERATE
Food processing: claims 48 percent, output growth 28 percent, MODERATE
Textiles and MMF: claims 42 percent, export growth 15 percent, UNDERPERFORMER
Telecom and networking: claims 22 percent, output growth 12 percent, UNDERPERFORMER
Specialty steel: claims 61 percent, output growth 45 percent, WINNER
Automobiles and auto components: claims 58 percent, output growth 31 percent, MODERATE
Solar PV modules: claims 52 percent, output growth 85 percent (from low base), WINNER
White goods: claims 44 percent, output growth 22 percent, MODERATE
The pattern is clear: sectors where India had an existing competence or cost advantage (pharmaceuticals, mobile assembly, specialty materials) absorbed the PLI well. Sectors where the scheme was expected to create competence from scratch (telecom equipment, advanced chemicals) largely did not deliver.
The Logistics And Skills Constraint
The PLI scheme's underperformers share a common diagnosis: the constraints holding back production growth are not capital costs or tax rates, which the PLI addresses, but logistics reliability, skilled labour availability and power supply, which it does not.
India's logistics cost as a share of GDP remains approximately 13 to 14 percent, compared to 8 to 9 percent in China and 6 to 8 percent in developed economies. That 5-percentage-point logistics cost premium erodes the PLI benefit in export-oriented manufacturing, particularly in sectors with thin unit margins.
The skills constraint is more sector-specific but equally real. Semiconductor fabrication, advanced electronics and precision manufacturing require a workforce with specific technical training that India's current engineering graduate pipeline produces in smaller numbers than the sector demands. The government's Semiconductor Mission is attempting to address this through curriculum reform and institute expansion, but the lag between policy announcement and trained workforce availability is measured in years, not quarters.
The China Plus One Dynamic
India is the most frequently cited alternative to China in global supply chain restructuring discussions. The desk's assessment is that the India opportunity is real but concentrated and often overstated in terms of immediacy.
The sectors where India can substitute for China at scale within a 3 to 5 year horizon: generic pharmaceuticals (already competitive), mobile phone assembly (established and growing), specialty chemicals (competitive with investment), solar module manufacturing (growing quickly with policy support).
The sectors where India cannot substitute for China at scale within a decade: advanced semiconductors, precision machinery, complex electronics components, industrial automation equipment. The technology gap is simply too large and the ecosystem too thin.
The FDI data is instructive. India received approximately USD 26 billion in manufacturing FDI in fiscal year 2025, up from USD 18 billion in 2022. That is a genuine acceleration. But China's manufacturing FDI inflows in 2025, despite the China plus one narrative, also remained substantial at approximately USD 35 billion. The narrative of China replacement is less accurate than the narrative of China supplementation: global manufacturers are building India capacity in addition to, not instead of, China capacity.
Investment Implications
The desk's preferred exposure to the PLI opportunity: listed Indian manufacturers in mobile electronics supply chain and pharmaceutical APIs; logistics infrastructure operators benefiting from the industrial zone buildout; and financial services companies extending credit to the manufacturing SME tier.
What the desk avoids: companies in PLI sectors with a history of claiming incentives without genuine technology development; and infrastructure plays that are priced for PLI-driven growth without accounting for execution timelines.