Production Linked Incentive (PLI) Scheme: A Guide for Exporters

The Production Linked Incentive (PLI) scheme is a central part of India’s push to strengthen domestic manufacturing under Make in India. Instead of supporting businesses through blanket subsidies, the scheme rewards you for producing and selling more from India. For exporters, this matters because scale and competitiveness now decide who survives in global markets.

PLI marks a clear shift in policy thinking. Incentives depend on actual performance, measured through incremental production and sales. This approach encourages businesses to invest in capacity, improve quality, and meet global benchmarks rather than rely on cost support.

By encouraging firms to plug into Global Value Chains (GVCs), the scheme supports India’s ambition of reaching USD 1 trillion in merchandise exports by 2030.

What Is the Production Linked Incentive (PLI) Scheme?

The Production Linked Incentive scheme was launched in March 2020 and later expanded to cover 14 strategic sectors, ranging from electronics and pharmaceuticals to automobiles and textiles. Its purpose is straightforward: encourage companies to manufacture more in India and sell more from India, especially for global markets.

At its core, the scheme offers financial incentives of around 4% to 6% on incremental sales of goods manufactured in India. These benefits are open to both Indian companies and foreign firms that have registered manufacturing operations in the country. The Department for Promotion of Industry and Internal Trade (DPIIT) oversees the scheme and acts as the central nodal authority, ensuring consistent implementation across sectors.

Primary objectives of the PLI scheme

• Boost large-scale domestic manufacturing
• Reduce import dependence in critical sectors
• Improve India’s export competitiveness
• Attract long-term investment into production capacity

How Does the Performance-Linked Mechanism Work?

The incentive kicks in only when measurable growth happens.

• Each sector defines a base year, and incentives apply only to production beyond that level.
• Companies must commit to minimum investment thresholds to qualify.
• The incentive window usually spans five to six years, depending on the sector.
• Payouts happen only after confirmed sales, not on planned or estimated output.

Who Are the Target Beneficiaries of the PLI Scheme?

The policy focuses on two broad groups. The first includes large-scale manufacturers, especially in electronics and high-value sectors, positioned as Global Champions competing internationally. The second covers MSMEs in selected industries, treated as Domestic Champions with scale-up potential. Notably, the scheme strongly favours greenfield investments, encouraging new plants and fresh capacity rather than just expanding existing facilities.

Why Is the PLI Scheme Critical for Indian Exporters?

For Indian exporters, the PLI scheme directly addresses a long-standing problem: higher manufacturing costs compared to global peers. These “disability” costs—such as logistics inefficiencies, scale disadvantages, and higher input dependencies—often made Indian goods less competitive overseas. By linking incentives to incremental output, PLI helps offset these gaps without distorting prices or encouraging inefficiency.

The scheme also strengthens India’s foreign exchange position. Higher exports translate into stronger forex inflows and gradually reduce pressure on the trade deficit. This shift is already visible in sectors like mobile phones, where India has moved from being a large importer to a net exporter within a few years.

PLI has also aligned India with the global China Plus One strategy. As multinational companies look to diversify supply chains, the scheme makes India a credible alternative by offering scale, policy stability, and predictable incentives.

How Does PLI Drive Integration into Global Supply Chains?

• Large anchor manufacturers (OEMs) set up or expand operations in India, bringing their global vendor networks with them.
• Sector-specific localisation requirements help build domestic component and supplier ecosystems over time.
• Higher production volumes justify investments in tooling, testing, and quality upgrades across the supply chain.
• PLI-linked investments often include R&D and technology transfer, raising India’s position in the value chain.

What Is the Impact on Cross-Border Payment Volumes?

As PLI-supported exports scale up, inward foreign remittances rise in both volume and frequency. Exporters must track incremental sales accurately to claim incentives, which increases the need for clean payment reconciliation and timely credit confirmations. High-volume exporters also gain from lower per-transaction costs, as larger and predictable inflows improve negotiating power with banks and payment partners, making international collections more efficient and transparent.

Which Sectors are Eligible for PLI Scheme Details?

The PLI framework currently covers 14 identified sectors, each chosen for its ability to scale manufacturing, reduce import dependence, or drive exports. While some sectors focus on replacing critical imports, others are clearly geared towards building export capacity, with electronics and automobiles receiving the highest financial outlays due to their global scale and multiplier effect.

High-Growth Sectors for Exporters

These sectors offer the strongest opportunities for exporters looking to integrate with global supply chains and generate cross-border revenue.

Mobile Manufacturing and Specified Electronic Components

This segment aims to shift global assembly and component production to India. The policy has helped attract manufacturers supplying to brands such as Apple and Samsung, positioning India as a key export base for smartphones and parts.

Pharmaceuticals and Active Pharmaceutical Ingredients (APIs)

The focus here is on lowering dependence on China for critical raw materials while strengthening India’s position as a leading exporter of affordable generic medicines and formulations.

Automobiles and Auto Components

PLI incentives encourage investment in electric vehicles (EVs), advanced batteries, and high-value auto components, helping Indian suppliers plug into global automotive supply chains.

Textile Products (MMF and Technical Textiles)

This segment targets man-made fibre (MMF) and technical textiles, where India has historically lagged. The goal is to regain global market share in high-margin textile exports rather than low-value cotton products.

Explore Razorpay’s Global Payment Solutions

PLI-Covered Sectors 

How Are PLI incentives Calculated for Cross-Border Sales?

PLI incentives follow a clear, numbers-based method, which makes accurate reporting critical—especially for exporters.

1. Start With Incremental Sales: Incremental sales mean the increase in your sales compared to the notified base year.

 Incremental Sales=Current Year Sales−Base Year Sales

1. Apply the Incentive Rate: Each sector has a fixed incentive percentage.

PLI Incentive=Incremental Sales×Incentive Rate

1. Verify Export Realisation: For cross-border sales, authorities verify export revenue using shipping bills and bank realisation certificates (BRCs). Export proceeds are converted into INR using prescribed exchange rates.
2. Exclude Taxes and Duties: Sales value usually excludes GST, customs duties, and other indirect taxes. Only the net realised value of manufactured goods qualifies for incentive calculations.

What Are the Challenges for Exporters Under the PLI Scheme?

While the PLI scheme supports scale, many exporters still struggle with low value addition. In several sectors, firms focus on final assembly using imported components. This limits domestic economic gains and reduces the long-term impact of incentives. As a result, export growth does not always translate into deeper manufacturing capability within India.

Another constraint comes from World Trade Organisation (WTO) constraints. Global trade rules restrict export-contingent subsidies, which forces the government to design PLI incentives carefully. This limits flexibility and often slows policy adjustments when market conditions change.

Exporters also face a growing compliance burden. Frequent audits, reconciliation of sales data, and documentation checks increase administrative effort. On top of this, delays in subsidy disbursement can strain working capital, especially for businesses operating on thin margins.

The “Assembly vs. Manufacturing” Debate

High import content in finished exports—such as mobile phones—reduces the net benefit to the economy, even when export numbers look strong.

• The government now pushes component localisation to move beyond basic assembly work.
• Local sourcing improves resilience but requires scale, capital, and time.
• Producing complex sub-assemblies like displays or camera modules remains difficult due to technology gaps and limited domestic ecosystems.

Assembly Model vs Deep Manufacturing

How Will the PLI 2.0 Package Evolve for Global Trade?

PLI 2.0 is expected to move beyond volume-driven incentives and focus more sharply on domestic value addition. Instead of rewarding final assembly alone, future payouts may depend on how much of the product is actually made in India—components, inputs, and processes included. This shift aims to build stronger local supply chains and help Indian manufacturers capture more value within global trade flows.

The next phase may also widen the net. Policymakers are considering labour-intensive sectors such as leather and footwear. which can generate large-scale employment and exports. At the same time, a proposed “Green PLI” framework would encourage energy-efficient and low-carbon manufacturing to meet sustainability expectations in global markets. Supporting all this is a push towards simpler, digital-first applications and verification, reducing paperwork and speeding up incentive claims for businesses.

Optimising Export Revenue With Razorpay MoneySaver Export Account

As PLI incentives depend on accurate, realised export revenue, how you collect overseas payments directly affects both cash flow and compliance. The Razorpay MoneySaver Export Account is designed to remove friction from this last mile of the export cycle.

• It lets overseas clients pay you in USD, EUR, GBP, and other currencies through local bank transfers, with funds settled into your Indian bank account in INR.
• By reducing international transfer charges and eliminating hidden currency conversion markups, exporters can save up to 75% on bank fees, directly improving margins on incremental sales.
• The platform automatically generates electronic Foreign Inward Remittance Advices (e-FIRAs), simplifying the documentation required to validate export earnings for PLI incentive claims.
• With single-click access to ACH, SEPA, and SWIFT transfers, MoneySaver lowers reconciliation effort and speeds up the realisation of global revenue, supporting healthier working capital cycles.

Conclusion

The PLI scheme stands out as a clear turning point in India’s manufacturing and export strategy. By rewarding performance rather than promise, it encourages companies to scale production, improve quality, and integrate more deeply with global markets. Together, these shifts strengthen India’s position as a credible, long-term manufacturing and export hub.

For businesses, the message is straightforward. Growth plans need to align with PLI-eligible sectors, with a strong focus on value addition and global competitiveness. Incentives can accelerate expansion, but lasting gains will depend on disciplined compliance and the ability to scale production reliably for international demand.

FAQs

Q1. What is the primary goal of the Production Linked Incentive scheme?

The PLI scheme aims to strengthen domestic manufacturing, attract large-scale investment, and make Indian industries globally competitive by rewarding incremental production and sales.

Q2. How are the incentive rates determined for manufacturers?

Eligible companies receive incentives, typically between 4% and 6%, calculated on incremental production or sales over a defined base year.

Q3. Which sectors are currently eligible for PLI scheme benefits?

The scheme covers 14 sectors, including mobile manufacturing, automobiles, pharmaceuticals, medical devices, textiles, and high-efficiency solar modules.

Q4. Is the PLI scheme applicable to foreign companies?

Yes. Both Indian and foreign companies can apply, provided they are legally registered and manufacture goods in India.

Q5. How does the PLI scheme benefit Indian exporters specifically?

It helps offset cost disadvantages, supports integration into global value chains, and encourages exporters to scale up in high-growth, export-oriented sectors.

Q6. What role does the DPIIT play in the PLI framework?

The DPIIT acts as the nodal agency, overseeing coordination, implementation, and monitoring across ministries.

Q7. How do proposed PLI 2.0 reforms affect existing manufacturers?

PLI 2.0 is expected to place greater emphasis on domestic value addition and localisation, with possible expansion into labour-intensive sectors such as leather and footwear.