Modi government's $23B manufacturing push to compete with China ends
21 Mar 2025

India's ambitious $23 billion initiative to boost domestic manufacturing and compete with Chinese factories is ending after four years, according to Reuters.

The program, which lured major companies like Foxconn and Reliance Industries with promises of cash incentives, has seen many participants either struggling to meet production targets or facing delays in receiving these incentives.

This lack of significant impact has prompted the Indian government to consider alternative support measures.

Program not to be extended beyond initial sectors
Non-extension

Despite requests from some participating firms, the Indian government has decided against extending the program beyond its initial 14 pilot sectors.

Around 750 companies had signed up for the Production-Linked Initiative scheme, which sought to raise manufacturing's share of the economy to 25% by 2025.

However, many firms found it difficult to start production and those that did meet targets found India slow in disbursing subsidies.

Impact on India's manufacturing sector
Mixed results

As of October 2024, the participating firms had manufactured goods worth $151.93 billion under the program, merely 37% of the target set by Delhi.

The Indian government had disbursed only $1.73 billion in incentives, under 8% of the allocated funds.

Despite these hurdles, Prime Minister Narendra Modi's office and commerce ministry defended the program's impact last year on sectors such as pharmaceuticals and mobile-phone manufacturing which have grown significantly.

Government plans alternative support measures
Future plans

However, the end of the program doesn't mean Delhi has given up on its manufacturing ambitions.

The government is mulling supporting certain sectors by partially reimbursing investments made to set up plants, enabling firms to recover costs faster.

Trade expert Biswajit Dhar had earlier expressed concern that India might have missed its chance with this incentive program, calling it "possibly the last chance we had to revive our manufacturing sector."

India's growth in pharmaceuticals and mobile-phone production
Sector growth

Despite the hurdles of the program, India has witnessed tremendous growth in sectors such as pharmaceuticals and mobile-phone manufacturing.

In the 2023-24 fiscal year alone, India manufactured mobiles worth $49 billion, a 63% increase over 2020-21.

Likewise, pharmaceutical exports almost doubled to $27.85 billion in 2023-24 as compared to a decade ago.

However, other sectors like steel, textiles, and solar panel manufacturing still face stiff competition from cheaper rivals like China.