How the government’s flagship PLI schemes are lagging in job creation

Launched in March 2020, the NDA-government’s flagship production-linked incentive scheme (PLI) achieved 76% of its investment target and 64% of its production target until March 2026. But its 14 schemes have generated just 8.49 lakh jobs — 28% of their target of 30.18 lakh — a NITI Aayog report showed.

Data released by the NITI Aayog showed that employment outcomes vary dramatically across sectors. While top job creators included the food products PLI scheme, generating 3.29 lakh jobs, the one for large-scale electronic manufacturing supported 1.69 lakh jobs, followed by 1.14 lakh jobs created by the scheme for manufacturing of pharma drugs (for complete chart, scroll to the end of the story).

Job generation under other schemes, however, did not cross the one-lakh mark.

Automobiles and auto components created 67,820 jobs, well below the projected five-year target of 1.48 lakh jobs.

White goods, on the other hand, created only 52,703 jobs. Telecom and networking created 33,610 jobs; textiles supported 33,427 jobs. Solar PV modules, speciality steel, bulk drugs, medical devices, IT hardware, drones and drone components, and battery manufacturing schemes created less than 15,000 jobs each.

Long gestation period 

The report, prepared in partnership with IIM Ahmedabad, said that the divergence between cumulative employment and investment and production can be understood in the context of the gestation period of manufacturing investments.

The assessment said that the investment generally takes place before facilities become fully operational; production then ramps up as capacity is commissioned and utilisation increases, while employment can evolve further as operations reach commercial scale, and so the three principal outcome parameters need not progress at the same pace.

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However, the authors of the report hinted that stringent targets for disbursement of incentives could be among the reasons for the weaker take-off of a few schemes, adding that industry participation is important in deciding the targets a sector faces.

Steep targets have been pointed out in several industries as an impediment to taking advantage of the scheme, which in its current form is a supply-driven scheme. The report has suggested modification in the scheme to include a demand-side support.

Stringent targets

“More stringent targets, especially in sectors where gestation periods are long, and there is a lot of demand uncertainty (owing to dynamics of international trade, changing geopolitical circumstances, etc.), will lead to lower adoption of the PLI scheme. Further, mechanisation of industry can also lead to the industry finding it difficult to reach employment targets. Therefore, the participation of industry in designing sector-specific policies becomes more imperative,” the report said.

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The report said that the 14 PLI schemes have completed 58% of their aggregate implementation period, with 578 months completed against an aggregate duration of 996 months.

“A substantial 42% of the aggregate implementation period is remaining. The portfolio therefore represents a mix of schemes at different stages of maturity, with some having progressed substantially and others still moving through the investment and gestation phase. The current stage is consequently sufficiently advanced to assess emerging outcomes, but not sufficiently mature to judge the schemes solely against their ultimate full-tenure targets,” the report said.

Disbursements less than 20% 

The assessment report of the scheme also pointed out that capital-intensive sectors may generate substantial investment without a proportionate increase in employment, while technology-intensive sectors may require a longer gestation period before production and export outcomes become visible.

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“A cross-sector assessment highlights an important feature of the PLI framework: the schemes are not uniform in either their objectives or their implementation trajectory. In some sectors, the immediate priority is to establish domestic capacity and reduce import dependence; in others, the emphasis is on achieving scale, increasing exports and securing a position in global value chains,” the report said.

Cumulative incentive disbursements under the 14 PLI schemes notified in 2020 across key sectors also stood at 18.51% of the total outlay of Rs 1.91 lakh crore as of March 2026. Data released by the think tank showed that nine PLI schemes, including those for bulk drugs, automobiles and textiles, had disbursements of less than 10% of their respective outlays.

However, schemes for drones and drone components, large-scale electronics and food products saw disbursements ranging from 25% to 77% of their outlays. To be sure, all schemes did not come into effect in 2020, with some schemes having a longer gestation period.