Size matters: Decoding Indian manufacturing’s problem of scale
Subscribe to enjoy similar stories. New Delhi: The production-linked incentive (PLI) scheme—one of the ways in which this government was hoping to increase manufacturing in India—is going through a slowdown, with planned expansions to the programme being put on hold.
Disbursements under the scheme, which amounted to ₹10,000 crore in 2023-24, had slowed to around ₹1,000 crore so far this year, according to a Mint report. One reason for the slowdown in disbursements is that the current lot of beneficiary firms are struggling to meet their production targets under the scheme—a pre-condition to receive incentives.
For instance, in the textiles sector, companies must invest ₹300 crore and achieve a minimum turnover of ₹600 crore by the first ‘performance year’, 2024-25. According to the report, the textiles ministry has, for now, suspended a previous plan to expand the scope of the scheme to t-shirts and innerwear.
The textiles sector has turned out to be a missed opportunity so far. A recent World Bank report pointed out that India’s share of global exports of apparel, leather, textiles and footwear (ALTF) rose from 0.9% in 2002 to 4.5% in 2013, only to fall to 3.5% by 2022.
Even as China’s dominance in the sector started to slow by 2015, with its share of global exports first levelling off and then declining, the benefits went to Bangladesh and Vietnam rather than India. Why is textiles so important, especially when India’s performance in other sectors such as automobiles, and even electronics, has been much better, with Apple moving part of its iPhone manufacturing to India? As the World Bank report points out, in 2020, capital-intensive sectors (which would include electronics and automobiles) accounted for 70% of
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