India's Manufacturing Bet: PLI Schemes, China+1, and the Race to Capture Global Supply Chains
- ▸India's PLI schemes across 14 sectors have committed Rs 1.97 lakh crore in incentives, attracting over Rs 4 lakh crore in investment and generating exports exceeding Rs 10 lakh crore cumulatively through 2025-26.
- ▸The China+1 strategy — where multinationals diversify manufacturing away from China — is creating genuine investment opportunities for India, Vietnam, Mexico, and Indonesia, with India capturing a growing share of electronics and pharmaceutical exports.
- ▸Structural challenges including logistics costs, land acquisition complexity, labour regulation rigidity, and component import dependency on China remain significant bottlenecks for India's manufacturing ambitions.
Global supply chain geography is being redrawn. The pandemic exposed the danger of hyper-concentration in Chinese manufacturing; the US-China tech and trade war added geopolitical impetus; and rising Chinese labour costs reduced the cost differential that made China the obvious choice. The result is a genuine diversification wave — and India has positioned itself to capture a meaningful share.
What Are PLI Schemes?
Production Linked Incentives are government cash transfers to companies based on incremental production above a baseline. If a company commits to a minimum investment and then exceeds its baseline production by, say, Rs 1,000 crore, the government pays it 4-6% of that incremental output. This design is production-linked rather than investment-linked, reducing the risk of companies claiming subsidies for capacity that never produces. India has deployed PLI across 14 sectors from mobile phones and semiconductors to food processing and drone manufacturing.
The China+1 Opportunity
Multinationals are not abandoning China — they are building parallel capacity elsewhere. Apple has moved iPhone assembly to India (Foxconn and Tata); Samsung makes smartphones and displays; Foxconn, Pegatron, and Wistron have all committed to Indian expansion. In pharmaceuticals, India was already the world's pharmacy for generics; the pandemic accelerated API (active pharmaceutical ingredient) localisation. The question is whether these represent deep integration into Indian supply chains or shallow final assembly that remains critically dependent on Chinese components.
The PLI scheme is perhaps the most ambitious industrial policy intervention in India since the Licence Raj era — but in reverse. Rather than restricting production, it incentivises it, paying companies cash rewards linked to incremental output above a baseline. The 14 PLI sectors span mobile phones, pharmaceuticals, textiles, food processing, automobiles, solar modules, white goods, specialty steel, and more. The headline numbers are significant: PLI-linked production has crossed Rs 10 lakh crore, with exports from PLI sectors growing at 30%+ annually in key categories. Apple now manufactures approximately 14% of its global iPhone output in India — a figure that would have seemed implausible five years ago. The challenge is translating this momentum into deep, diversified industrial capability rather than isolated assembly nodes dependent on Chinese components.
Primary Sources
Cite This Article
Khagan Rao. (2026, June 28). India's Manufacturing Bet: PLI Schemes, China+1, and the Race to Capture Global Supply Chains. EconoLens. https://econolens.co.in/news/india-manufacturing-pli-china-plus-one-2026
Khagan Rao is an economist and analyst specialising in global monetary policy, fiscal frameworks, and international trade. He tracks publications from the IMF, World Bank, BIS, and RBI to deliver accessible, data-driven analysis for a global audience.