PLI Schemes and Corporate Concentration: Who Really Benefits from India’s Production Incentives?

Introduction: The Rise of India’s PLI Strategy

When India launched the Production Linked Incentive (PLI) scheme in 2020, it represented one of the most ambitious industrial policy experiments in modern Indian economic history.

With an allocation of nearly ₹1.97 lakh crore across 14 strategic sectors, the objective was clear:

• Boost domestic manufacturing
• Reduce import dependence
• Increase exports
• Build global supply chains
• Position India as an alternative manufacturing hub

The scheme quickly became the core engine behind the broader Make in India vision.

Within a few years, investments crossed ₹2 lakh crore, exports surged in selected sectors, and industrial production accelerated in electronics, pharmaceuticals, solar modules, telecom equipment, and auto components.

But another reality emerged alongside the success narrative:
The largest benefits flowed disproportionately toward large corporations and established industrial players.

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Electronics Manufacturing: The Biggest Winner

The electronics sector became the flagship success story of the PLI framework.

India transformed from a major importer of mobile phones into a large-scale domestic manufacturing hub. Electronics exports recorded explosive growth, while local production now meets nearly all domestic mobile phone demand.

The rapid expansion was driven by:

• Global supply-chain diversification
• Apple ecosystem expansion
• Contract manufacturing growth
• Government incentives tied directly to production scale

However, the benefits remained highly concentrated.

A handful of firms dominate the sector:

• Dixon Technologies
• Bhagwati Products
• Chinese ODM partners like Longcheer and Huaqin

These firms possessed:

• Existing manufacturing scale
• Capital access
• Global supply-chain relationships
• Operational infrastructure

The PLI system strengthened their dominance further.

Ironically, as incentives phase out, competition is increasing. Smartphone brands are diversifying manufacturing partnerships instead of relying on single large manufacturers. This suggests that PLI may have succeeded in building the ecosystem—but not necessarily a broad base of industrial participation.

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Pharmaceuticals: High Value, High Concentration

The pharmaceutical sector delivered another major success under PLI.

India significantly expanded domestic manufacturing of:

• Bulk drugs
• Active pharmaceutical ingredients (APIs)
• High-value pharmaceutical products

The scheme reduced import dependence and increased domestic value addition substantially.

Yet the structure of incentives clearly favoured larger firms.

The pharma PLI model divided applicants into categories based on global manufacturing revenue:

• Large firms received the overwhelming majority of incentives
• Mid-sized firms received smaller allocations
• Smaller firms received the least support

This design effectively institutionalised concentration.

Supporters argue this was necessary because:

• Large pharma firms already possessed global export networks
• Scale matters in pharmaceutical manufacturing
• Compliance and regulatory costs are extremely high

Critics argue the opposite:
The scheme reinforced the dominance of established pharmaceutical giants while limiting opportunities for smaller innovators and emerging companies.

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Food Processing: A More Inclusive Model

Among all PLI sectors, food processing offers one of the most balanced outcomes.

Unlike electronics and pharma, the food processing scheme incorporated:

• MSME participation
• Regional diversification
• Branding support
• Export promotion

The results were comparatively broad-based:

• Hundreds of project locations
• Significant MSME participation
• Strong employment generation
• Rising processed food exports

This demonstrates an important policy lesson:
Industrial incentives can support both growth and inclusion if designed carefully.

The food processing model suggests that concentration is not inevitable—it depends on policy architecture.

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ACC Batteries: The Risks of Concentrated Industrial Policy

The Advanced Chemistry Cell (ACC) battery scheme reveals the dangers of concentration without execution.

Massive production capacities were allocated to a small number of large corporations, including:

• Ola Cell Technologies
• Reliance-linked entities
• ACC Energy Storage

Yet implementation remained extremely slow.

Despite large announcements:

• Actual installed capacity remained minimal
• Imports continued dominating the market
• Employment creation stayed weak
• Incentive disbursal barely progressed

This exposes a critical flaw:
Awarding large-scale incentives to major corporations does not automatically guarantee industrial delivery.

Industrial ecosystems require:

• Execution capacity
• Supply-chain depth
• Technology readiness
• Skilled workforce development

Concentration alone cannot substitute for ecosystem maturity.

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The Startup Exclusion Problem

One of the strongest criticisms of the PLI framework concerns startups and emerging firms.

Eligibility requirements often depended on:

• Revenue thresholds
• Existing manufacturing scale
• Fixed asset levels
• Prior operational capacity

This naturally favoured incumbents.

Many startups lacked the size necessary to qualify when schemes launched. As a result:

• Innovative firms remained excluded
• New entrants struggled to compete
• Existing corporate dominance deepened

Critics warn that extending PLI benefits repeatedly to the same companies could eventually damage market competition.

The concern is especially serious in emerging industries such as:

• Electric vehicles
• Battery technologies
• Semiconductor ecosystems
• Clean-tech manufacturing

These sectors evolve rapidly, and innovation often emerges from smaller disruptive firms rather than established giants.

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The Concentration Debate

At the heart of the PLI discussion lies a larger philosophical debate about industrial policy.

The Government’s Argument

Supporters believe concentration is necessary because:

• Global manufacturing requires scale
• National champions drive competitiveness
• Large firms integrate global supply chains faster
• Capital-intensive industries need massive investments

Countries like South Korea and China also relied heavily on large industrial champions during their industrialisation phases.

The Critics’ Argument

Opponents argue:

• Concentration creates oligopolies
• Innovation declines when incumbents dominate
• Smaller firms lose market access
• Public incentives become corporate subsidies

The concern is not simply economic efficiency.
It is whether public industrial policy should primarily strengthen already powerful corporations.

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Export Growth and Import Substitution

Despite concentration concerns, the PLI scheme has undeniably produced measurable gains.

Major achievements include:

• Rapid export growth in electronics
• Import substitution in telecom equipment
• Expansion in solar manufacturing
• Increased domestic pharmaceutical production
• Growth in organised manufacturing investment

These outcomes are strategically important for India because they:

• Reduce external dependence
• Improve trade resilience
• Strengthen industrial capabilities
• Expand formal manufacturing ecosystems

The challenge is ensuring these gains become broad-based rather than concentrated among a small group of firms.

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Employment: Progress but Limited Scale

PLI schemes have created organised-sector jobs, especially in:

• Electronics assembly
• Food processing
• Auto components
• Renewable energy manufacturing

However, total employment generation remains modest relative to India’s labour force size.

The reason is structural:
Most PLI-supported sectors are highly capital-intensive.

Modern manufacturing increasingly depends on:

• Automation
• Robotics
• Precision systems
• High-tech production processes

As a result, output grows much faster than workforce expansion.

India’s core employment challenge therefore remains unresolved.

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PLI 2.0: The Next Industrial Debate

As the first phase of PLI approaches maturity, attention is shifting toward a possible PLI 2.0 framework.

Key questions include:

• Should startups receive dedicated quotas?
• Should MSMEs receive lower eligibility thresholds?
• Should incentives reward innovation instead of scale alone?
• Should mature sectors lose subsidies gradually?
• How can industrial policy balance efficiency with competition?

The answers will shape the next phase of India’s industrial transformation.

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The Central Question

The PLI scheme has changed India’s manufacturing landscape.
That much is undeniable.

Electronics manufacturing expanded rapidly.
Exports increased.
Industrial investment accelerated.
Global firms deepened supply-chain integration with India.

But the transformation also exposed a deeper structural issue:
India’s industrial policy heavily favours scale and established corporate power.

Whether this creates globally competitive industrial champions or entrenched corporate concentration will define the long-term legacy of the PLI era.

The evidence so far offers two competing lessons:

• Electronics shows ecosystem success through scale
• Food processing shows inclusion can coexist with growth
• ACC batteries show concentration without execution can fail

The future of PLI 2.0 depends on which lesson policymakers choose to follow.