India's Modi government has decided to end a $23 billion incentive plan aimed at luring manufacturers away from China.
The production-related quadrennial program aims to increase the share of manufacturing to 25% by 2025, but failed to approach that score due to slow payments and excessive traditional tape festivals. According to four official sources who spoke with Reuters, the participating companies met production targets in only 14 departments targeted.
About 750 companies, including Apple supplier Foxconn The faith industry of Indian business groups signed the plan. They said some participants hope this will expand, but the government now has a new focus – cutting tariffs to avoid our levy on India's exports.
See also: Asian defense stocks soar like Europe, we hope to re-armor – ft
If the company meets personal production goals and deadlines, it is promised to pay cash. However, according to government documents and exchanges seen by Reuters, many companies involved in the program failed to start production, while others that met manufacturing targets found subsidies in India were slow.
According to an undated analysis compiled by the Ministry of Commerce, as of October 2024, the plan produced nearly US$152 billion in goods under the plan, or 37% of the target was Delhi.
India issued only $1.73 billion in incentives — less than 8% of allocated funds, the document said. News of the government's decision not to expand the plan and details about lagging spending is reported for the first time.
The Modi office and the Ministry of Commerce, which oversee the plan, did not respond to requests for comment. Since the introduction of the plan, the economic share of manufacturing has dropped from 15.4% to 14.3%.
Foxconn now employs thousands of contract workers in India, and Reliance has not refunded a request for comment.
The end of the plan does not mean that Delhi has abandoned its manufacturing ambitions and plans for alternatives, two government officials told Reuters.
Bureaucratic prudence, planned reimbursement
The government defended the impact of the program last year, especially in pharmaceutical and mobile phone manufacturing, which have exploded. Of the nearly $620 million incentives paid between April 2024 and October 2024, about 94% targeted both sectors.
Analysis shows that in some cases, certain food industry companies applying for subsidies issued subsidies due to factors such as “not complying with investment thresholds” and “unable to achieve the prescribed minimum growth.” The document provides no specific details, although the document found production in the industry exceeded its target. Reuters was unable to determine the company the analysis was referring to.
Delhi had previously acknowledged the issue and agreed to extend some deadlines and increase payment frequency following complaints from PLI participants. An Indian official, who spoke on condition of anonymity, said over-the-top traditional Chinese tape and bureaucratic caution continued to hinder the effectiveness of the plan.
Another official said as an alternative, India is considering supporting certain sectors with partial reimbursement of investments made for the establishment of factories, which will allow companies to recover costs faster than waiting for production and sales.
Biswajit Dhar, a trade expert at the Delhi-based Social Development Commission, said the Modi government needs to do more to attract foreign investment, saying the country may have missed its moment.
The incentive program, he said, is “probably the last chance we have to restore manufacturing.” “If this giant intelligence fails, do you expect any success?”
Bid to avoid trade wars
Manufacturing is amid a stagnation as India tries to avoid a trade war released by U.S. President Donald Trump, who criticizes Delhi's trade protectionist policies.
Dahl said Trump's reciprocal tariff threats to countries like India for countries like trade surplus with the U.S. meant that export sectors are increasingly being challenged. “There is a certain tariff protection…all things that will be cut.”
The PLI program was introduced at the right time in India: China has been the floor of the world's factories for decades and has been working hard to maintain production Beijing's zero-volatility policy.
The United States is also trying to reduce its economic dependence on the increasingly confident Beijing, prompting many multinational companies to pursue a “China plus one” policy to diversify production lines.
India seems to benefit from its young population, lower costs and relatively Western-friendly government.
Great growth in pharmaceuticals, mobile phone manufacturing
In recent years, India has become a global leader in pharmaceutical and mobile phone production.
Government data shows that the country produced $49 billion worth of mobile phones in the 2023-24 fiscal year, a 63% increase from 2020-21. Industry leaders like Apple now produce their latest and most complex phones in India after starting with low-cost models.
Similarly, drug exports nearly doubled to $27.85 billion in 2023-24, a decade ago.
However, there are no repeated successes in other areas, including steel, textiles and solar panel manufacturing. India faces fierce competition from cheap competitors like China in many areas.
For example, in the solar industry, eight of the 12 companies signing PLI are unlikely to meet their targets, according to an analysis of the industry seen by the Ministry of Renewable Energy and Reuters in December 2024. Eight companies include dependent units, Adani Group and Indian Group JSW.
The analysis found that the dependent institutions will only meet 50% of the production targets for the end of the fiscal year 2027. It also said that the Adani business has not ordered the equipment needed to make solar panels and that JSW has not “do anything”.
JSW declined to comment, and Adani did not answer the question.
The Commerce Department said in a letter to the Ministry of Renewable Energy seen in January that it disagrees with its requirement to extend the plan beyond 2027, because doing so “will have an unfair benefit to non-performance people.”
Responding to Reuters’ questions, the Ministry of Renewable Energy said it was committed to “equal and accountability” and “ensure that only those who meet their goals can receive rewards.”
In the steel sector, investment and production also lag behind targets. According to analysis within the undated range, 14 of the 58 projects approved for PLI have been withdrawn or deleted due to lack of progress.
- Jim Pollard's additional editor Reuters
See also:
April 2 is set to unveil Trump's reciprocal tariff date
No Asian country meets air quality standards by 2024
Trump's steel tariffs will reach China's supply line through other countries
The Indian solar panels we hold may be bound to China
Indian regulator recalls competition investigation report about Apple
Apple's India boosts as New Delhi cuts tariffs on technology imports
Apple bet on India's middle class hunting future market
India approves US$968 million from Foxconn unit investment
Foxconn wins Apple Airpod order to build $200 million in India factory
Vietnam, India is accelerating US exporter – Kesing
Apple supplier Foxconn accelerates India's expansion
