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.
Sector Performance: Where PLI Is Working
Mobile phones have been the PLI standout. India's smartphone exports crossed $15 billion in FY2025, up from under $500 million in FY2020 — a 30-fold increase in five years. Apple's India-made iPhones now reach 75+ countries. Pharmaceuticals have maintained India's position as a top-3 global generics exporter. The automobile PLI — covering advanced chemistry cell batteries and EVs — has attracted commitments from domestic OEMs and is beginning to build a domestic battery supply chain. Solar module manufacturing capacity has grown from near-zero to 50GW+ annually, though Chinese polysilicon and wafer dependence remains a vulnerability.
Where PLI Is Struggling
Textiles — one of the largest employment generators in any manufacturing economy — has underperformed PLI targets significantly, partly because the scheme's design favoured man-made fibres over cotton (India's comparative advantage) and partly because competitors in Bangladesh and Vietnam offer lower wages and better logistics. Semiconductors remain at early stage; the ISMC and Tata-Powerchlp projects are under construction but commercial production is years away. White goods (appliances) have attracted some investment but component localisation remains shallow.
The Logistics Gap
Manufacturing competitiveness is not just about factory costs — it is about the total landed cost at a customer's door. India's logistics costs as a share of GDP are estimated at 13-14%, versus 8% in China and 6-8% in OECD economies. Port turnaround times, multi-modal freight infrastructure, and last-mile connectivity remain weaker than China despite significant PM Gati Shakti improvements. Closing the logistics cost gap from 14% to 9% of GDP — the government's stated target — would add more to manufacturing competitiveness than any PLI incentive.
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.