Why PLI 1.0 Has Paid Out Less Than A Fifth Of The Promised Rs 1.97 Lakh Crore

By Dev Chandrasekhar 

In 2020, the government offered Indian factories a deal. A company that picked a product from a government list, spent a set minimum on its plant, and sold more than it had in a fixed earlier year would receive a percentage of the extra sales for five years. 

Because the payment follows output, the programme is called the production-linked incentive, or PLI.

It grew into fourteen schemes worth Rs 1.97 lakh crore, from phones, cars and medicines to textiles, steel, solar panels, battery cells and drones, making it one of India's largest industrial subsidies.

The first round is now closing scheme by scheme. 

The large-scale electronics scheme for phones ended on March 31, 2026; in July the Cabinet approved a Rs 62,500 crore successor. The February Budget had already raised the scheme for the components inside those phones to Rs 40,000 crore; the textiles ministry said in July it would reopen applications once more.

India has started the second round before finishing the first, even as the first has paid out little of what it promised. 

The commerce ministry's latest figures put disbursements at Rs 36,754 crore by 30 June 2026, or 18.7% of the amount announced, in the seventh year of a programme meant to run for five. 

Against the Rs 1.91 lakh crore the ministry now counts as approved, the share is 19.2%. Rs 15,519 crore of it went out in 2025-26 alone. 

This matters because the next round is being built the same way. Where the first round's money went, and why most of it was never paid, shows can be expected from the new version of the scheme.

How The Money Is Spread 

Phones and other finished electronics are the largest recipient by far. The phone scheme, which also covers some electronic components, has paid Rs 19,091 crore. That is nearly half of the Rs 40,995 crore set aside for them, and more than half of everything the PLI has paid out.

Laptops, tablets and servers have a separate IT hardware scheme worth Rs 17,000 crore. It has paid only Rs 98 crore. 

Pharmaceuticals come second. The Rs 15,000 crore pharmaceuticals scheme pays companies for making higher-value finished medicines, such as complex generics and cancer drugs. It has paid Rs 6,662 crore, a share close to that of phones.

Food processing is third, with Rs 3,271 crore, or about 30% of its money. Together, the top three have taken 79% of all payouts.

After that, the numbers fall away quickly.

What A Company Has To Clear 

Each scheme sets a minimum investment and a sales target for every year it pays, with sales measured against a fixed base year, 2019-20 in the case of the phone scheme. Both must be met in the same year. Several schemes also require a minimum share of the product’s value to be made in India.

A company that meets these targets files a claim, which the ministry running the scheme checks against tax records. 

The money arrives after the year closes, and in some schemes only a year after the plant starts. So, there are five gates between a finished factory and a paid claim.

In most schemes, a company that misses any gate in a year loses that year's payment for good. It can build the plant, hire workers, start production, and still collect nothing.

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1.81 lakh units

That is how many passenger vehicles Maruti Suzuki, India's largest carmaker, sold to dealers in the domestic market in September, up 37% from 1.32 lakh a year earlier. Hyundai grew 10.9% to 57,166 units, while Tata Motors rose 15% to 68,810.

"We remain optimistic about the festive season, supported by a strong order book and healthy customer traction," said Shailesh Chandra, MD and CEO, Tata Motors Passenger Vehicles. Festivals begin in October this year, a month later than last year, so automakers are building inventories accordingly.

Future: ICRA expects FY27 wholesale volume growth of passenger vehicles at 4-6%, constrained by a high base and recent price hikes. The Core earlier reported that festive demand should lift India's car market, but global risks linger.

Catch Up Quick: In two-wheelers, Hero MotoCorp grew 14% to 7.39 lakh units, TVS Motor 17% to 482,073, and Honda Motorcycle and Scooter India 25% to 6.36 lakh. However, Bajaj Auto fell 12% to 2.39 lakh.

Critical Moment: Tractor sales declined during September. Escorts Kubota's domestic sales fell to 14,911 units from 17,803. It cited a high base, patchy monsoon and lower Kharif sowing as causes, though it expects festive demand and better rural liquidity to support volumes. Mahindra's sales also dropped 23% to 50,208 units. "The year-on-year decline is primarily attributable to the festive season shift," said Veejay Nakra, President, Farm Equipment Business, Mahindra & Mahindra.

Trustees Challenge Tata Rejig

Two senior trustees of the Sir Dorabji Tata Trust have reportedly questioned a proposal by Tata Trusts to restructure Tata Sons, saying they were not consulted before the plan was sent to the holding company’s board, Business Standard reported.

Catch Up Quick: Venu Srinivasan and Vijay Singh, vice-chairmen and trustees of the trust, said no meeting had been held to discuss the proposal before a September 28 letter was sent to Tata Sons.

The plan calls for merging Tata Electronics Systems Solutions and Tata Consulting Engineers with Tata Sons. Tata Trusts says the restructuring could allow Tata Sons to cease being an NBFC and a core investment company, helping it remain unlisted.

Context: The dispute comes after the RBI rejected Tata Sons’ application to surrender its certificate of registration and directed it to comply with norms applicable to an upper-layer NBFC.

Srinivasan and Singh said the proposal needs collective consideration of its legal, financial, commercial and governance implications before the Trust takes a position.

HDFC Bank Names Its Next CEO

HDFC Bank has appointed Anup Bagchi as managing director and CEO for three years from October 27, after receiving RBI approval. He will succeed Shashidhar Jagdishan, whose tenure ends on October 26.

The Signal: Bagchi, MD and CEO of ICICI Prudential Life Insurance, has more than three decades of experience across banking, capital markets, wealth management and insurance. He previously held senior roles at ICICI Bank, including leading retail and wholesale banking.

Context: Bagchi takes charge as HDFC Bank faces scrutiny over governance and compliance. The bank has dealt with issues including the Dubai regulator’s action over AT1 bond sales and an internal review of Rs 45 crore paid to the Maharashtra State Road Development Corporation that was classified as marketing expenses.

IATA Opposes Flight Shift

The International Air Transport Association (IATA) has opposed Mumbai International Airport Ltd’s (MIAL) proposal to shift around one-third of airlines’ international passenger and cargo operations to Navi Mumbai International Airport (NMIA) from October 1, urging the Ministry of Civil Aviation (MoCA) to intervene.

IATA said the proposed transition was not developed in consultation with airlines.

Context: IATA, in a September 9 letter to MoCA, said any transfer should be voluntary, commercially and operationally viable. MIAL has proposed the shift as Mumbai Airport’s Terminal 1 is set for demolition and reconstruction, now scheduled to begin in January 2027 after being deferred from mid-2025.

Experts said: "While Indian carriers may be able to manage it, international airlines cannot easily shift a third of their operations to another airport without significantly increasing costs and manpower," an industry source said on the condition of anonymity. Air France-KLM has also said splitting its Mumbai operations between the two airports would not be practical for its network.

India's Factory Activity Rebounds

The HSBC India Manufacturing PMI, compiled by S&P Global, jumped to 55.1 from a five-year low of 52.8 in August, its highest reading since February, though slightly below a preliminary estimate of 55.7.

Fast Facts: New orders rose at the fastest pace since February, driven by stronger demand for electronic, food, pharmaceutical and textile products.

Export orders also picked up, with manufacturers citing increased demand from clients in Brazil, Europe, the UAE and the US. Hiring resumed after an outright decline in August.

Context: Cost pressures rose, with input costs driven higher by electronic components, pharmaceutical items and steel, though the rate remained below its long-run average.

Inflation has stayed above the RBI's 4% target for three consecutive months, and the central bank is expected to raise interest rates by a total of 50 basis points this year to 5.75%.

India Flags Inflation Risk

Geopolitical tensions, elevated oil prices and tighter global financial conditions could raise India's imported inflation, the finance ministry said in its September Monthly Economic Review released on Thursday. It also warned that a strong El Niño could hurt winter crops.

Overview: Retail inflation rose to 4.82% in August, with food inflation at 5.95%, while wholesale inflation accelerated to 9.92% on renewed fuel and power price pressures. Festive demand and higher input costs could add to price pressures, it added, though government interventions may contain risks. The RBI's open market operations could help curb "undue demand-side overheating."

Setting: India's external sector remained resilient, with forex reserves at $765.9 billion as of September 18, covering about 11.1 months of imports. However, short-term pressure on the rupee persists amid unsettled US trade relations and volatile portfolio flows.

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On Episode 994