The production-linked incentive (PLI) scheme is often presented as the centrepiece of India’s manufacturing revival. It has delivered visible outcomes. Smartphone exports crossed $20 billion in 2024–25, pushing electronics into the top tier of India’s export basket. Yet export value is only a partial measure of success in an economy where job creation is the binding constraint. A recent report by the National Council of Applied Economic Research (NCAER) asks an uncomfortable but necessary question: if employment is a core objective, why is most public money flowing to sectors that generate relatively few jobs?
That question matters because PLI has grown into one of the largest industrial policy interventions since Independence. Spread across 14 sectors with a sanctioned outlay exceeding ₹2 lakh crore, it is reshaping investment incentives, firm behaviour, and state-level competition. Its design choices therefore have consequences that go well beyond export headlines.
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Headline outlays overstate PLI’s real footprint
Any assessment of PLI must first separate perception from fiscal reality. The frequently cited outlay of over ₹2 lakh crore reflects the maximum approved envelope, not actual expenditure. Payouts are contingent on firms meeting investment and production thresholds over several years. Parliamentary disclosures show that actual disbursements have lagged approvals in multiple sectors, either because projects were delayed or eligibility conditions were not met.
This distinction matters for two reasons. First, the true fiscal cost per job created may be lower—or higher—than assumed, depending on how much money has actually been paid out. Second, weak employment outcomes could reflect slow implementation rather than flawed intent. A credible evaluation therefore requires clarity on actual payouts per job, not just sanctioned allocations.
Capital-intensive bias weakens job outcomes
Even allowing for phased disbursements, NCAER’s core critique remains intact. PLI priorities are misaligned with India’s demographic profile. More than half the approved incentives are concentrated in capital-intensive sectors such as smartphones, IT hardware, telecom equipment, and drones. These industries rely heavily on automation, imported components, and specialised labour. Employment creation per crore of incentive is therefore structurally limited.
The contrast with outcomes is telling. Sectors such as food processing and pharmaceuticals, which have generated a disproportionate share of PLI-linked jobs so far, account for only a small fraction of total allocations. In effect, the scheme directs the most support to sectors least suited to mass employment. This is not an implementation failure but a design choice.
According to government data, cumulative employment generated across all PLI schemes stood at around 3.25 lakh jobs by late 2024. That figure is modest relative to the scale of incentives and to the annual addition to India’s workforce.
When incentives reward output that would have happened anyway
A further complication is the question of additionality. In sectors such as electronics assembly, it remains unclear how much of the output growth was genuinely induced by PLI and how much reflected global supply-chain shifts already under way. If incentives are subsidising production that would have occurred regardless, the scheme risks becoming a transfer rather than a catalyst.
This matters because employment outcomes depend not just on output growth, but on whether new capacities, suppliers, and skills are being created. Without strong additionality, PLI risks generating windfall gains for a narrow set of firms while delivering limited spillovers for jobs or productivity.
Electronics assembly is not manufacturing depth
India’s push into electronics manufacturing is strategically understandable. Reducing dependence on China and integrating into global value chains are legitimate goals. The mobile PLI has succeeded in attracting large-scale assembly operations. But assembly is not manufacturing depth. Domestic value addition remains thin, and job creation is limited.
What is missing is a systematic effort to build the component ecosystem—passives, printed circuit boards, tooling, testing facilities, packaging, and logistics—where both employment and resilience lie. Without this, electronics manufacturing will remain enclave-driven, with limited multiplier effects on jobs.
Textiles illustrate the employment paradox
The contrast with textiles is striking. India has the world’s largest cotton base, a complete fibre-to-fashion chain, and a large domestic market. Yet its global market share has stagnated since 2017, while Bangladesh and Vietnam have expanded theirs. Their success rests on labour-intensive production, cluster-based planning, and deep integration into global supply chains.
India’s textile value chain remains fragmented across states with uneven regulations, logistics bottlenecks, and weak supplier coordination. In this context, the absence of a strong, jobs-focused PLI for labour-intensive sectors is not a marginal oversight but a structural weakness.
MSMEs remain peripheral to PLI
Another limitation is the scheme’s bias towards large firms. High investment thresholds and compliance requirements make it difficult for micro, small, and medium enterprises (MSMEs) to participate directly. Yet MSMEs are where employment intensity is highest.
Without deliberate mechanisms to integrate MSMEs into PLI-driven supply chains—through credit access, technology upgrading, quality certification, and predictable payment systems—the employment impact will remain narrow and top-heavy.
The China+1 window is time-bound
Global manufacturing is being reshaped by rising wages in China, geopolitical risk, and demographic change. This China+1 opportunity will not remain open indefinitely. Countries that secure early contracts lock in supply-chain relationships that endure.
Vietnam and Mexico have moved quickly. India has attracted electronics assembly but has shown less urgency in scaling labour-intensive manufacturing. Without a course correction, India risks missing a rare alignment of global demand and domestic labour availability.
A jobs-first redesign is unavoidable
A meaningful reset would reorient PLI towards sectors such as textiles, garments, footwear, toys, leather goods, and food processing. Incentives should reward not just output, but employment intensity, domestic value addition, and supplier development.
State alignment matters. Tamil Nadu’s textile clusters show what predictable regulation and focused planning can achieve. Trade agreements such as the India–UK FTA can amplify gains, but only if domestic manufacturing is ready to exploit them.
India’s labour market faces a decisive decade. A capital-intensive PLI may boost select exports, but it will not absorb India’s workforce at scale. PLI does not need abandonment. It needs redesign. Without a jobs reset, India risks exporting more while employing too few.