Manufacturing PLI 2.0 Recalibration: What the Numbers Reveal

On 21 July 2026, the Ministry of Commerce and Industry tabled a Lok Sabha reply that read like a victory lap. Five years into India's Production Linked Incentive programme, actual investment stood at ₹2,40,138 crore. Cumulative exports from PLI sectors had crossed ₹15.2 lakh crore. Employment: 14.15 lakh, direct and indirect. Approved applications: 892.

Then you reach the annexures, and a second story shows up, one the government had already started acting on months earlier. Between February and July 2026, the PLI architecture was quietly taken apart and rebuilt. The flagship electronics scheme was allowed to lapse. A ₹62,500 crore successor was cleared by Cabinet. Battery incentives were cut to a rounding error. Auto allocations nearly tripled. This is what recalibration looks like when it is driven by spreadsheets rather than speeches.

The eighteen-paise problem

Start with the number that frames everything else.

Against an approved outlay of ₹1.91 lakh crore, the government had disbursed ₹35,354 crore in incentives as of 31 March 2026. That is roughly eighteen paise of every rupee committed, five years in. Commerce Minister Piyush Goyal confirmed the figure in Parliament in July.

By itself this is not a scandal. PLI pays only after a company builds, produces, sells above a baseline and gets its claim certified. Slow money can simply mean careful money. But the pattern of where it did not go is far more instructive than the headline.

Take large-scale electronics manufacturing, the scheme everyone reaches for when defending the programme. It was allocated ₹34,193 crore. Counting actual disbursements plus budgeted allocations, total payouts will land near ₹19,908 crore, or 58 per cent of the original pot. The shortfall exists because several approved participants, including Bharat FIH and a clutch of domestic handset makers, never hit their incremental production targets. Companies that overshot their own ceilings expected the unclaimed money to be redistributed proportionately. It was not.

So the most celebrated PLI scheme in the country underspent by some ₹14,000 crore, while delivering, on the same balance sheet, a 2.4-times rise in mobile phone production, a 77 per cent fall in handset imports, and a 99.2 per cent domestic manufacturing share for phones sold in India. Both things are true at once, which is roughly the whole difficulty of judging industrial policy.

Where the capital actually went

The sector-wise annexure is where the recalibration logic becomes obvious.

High-efficiency solar PV modules attracted the largest investment of any PLI sector at ₹64,873 crore. Pharmaceuticals followed at ₹45,158 crore, autos and auto components at ₹44,326 crore, specialty steel at ₹23,896 crore, and large-scale electronics at ₹20,580 crore.

Now set that against jobs. Food processing, with ₹9,207 crore of investment, reported 3,29,200 jobs, the largest employment figure in the entire programme, off roughly one-seventh of solar's capital. Solar PV itself produced 14,794. Advanced chemistry cell batteries, with ₹4,570 crore invested, reported 1,245 jobs. Drones managed 2,650 on ₹595 crore.

None of this makes solar a bad bet. Gigawatt-scale module lines are capital-hungry by design, and energy security is not measured in payroll. But if you are the official deciding where the next tranche goes, the ratios matter, and the export column reinforces the point: cumulative PLI-linked exports jumped from ₹4 lakh crore in FY24 to ₹6.5 lakh crore in FY25 and then to ₹15.2 lakh crore in FY26, a leap driven overwhelmingly by electronics rather than by the sectors absorbing the most capital.

“The first five years of PLI bought India scale. The next five will be judged on value capture — components, patents and payrolls, not just assembly lines and export headlines.”

The Budget as report card

Union Budget 2026-27 read less like a policy statement and more like an audit finding.

Total PLI allocations came in at ₹15,541 crore, down about 3 per cent from the FY26 revised estimate of ₹16,072 crore. Inside that flat headline, the money moved decisively.

Auto and auto components received ₹5,939.87 crore, a 184 per cent jump over the FY26 revised estimate of ₹2,091.26 crore. White goods more than tripled to ₹1,003.54 crore, helped along by compressor capacity rising from one million units in 2021 to ten million in 2025-26.

The other direction was blunter. The ACC battery scheme, headline outlay ₹18,100 crore, was budgeted ₹155.76 crore for FY26, revised down to ₹13.31 crore, and handed ₹86.01 crore for FY27. The reason is uncomfortable. As of October 2025, just 1.4 GWh, or 2.8 per cent, of the targeted 50 GWh had been commissioned within the stipulated timeline, all of it by Ola Electric. Hyundai Global Motors walked away from a 20 GWh award. In July 2026 the Ministry of Heavy Industries returned to the market with a global tender for the final 10 GWh, this time earmarked specifically for grid-scale stationary storage rather than EV cells. Bids close on 13 October 2026.

Textiles told a similar story in miniature: budgeted ₹1,148 crore for FY26, revised to ₹400 crore, allocated ₹405 crore for FY27. Ninety-six companies have been selected with committed investment of ₹12,822.67 crore and projected turnover of ₹58,294.18 crore. Getting there took two cuts to the minimum investment threshold and three rounds of applications.

What PLI 2.0 actually changes

PLI-LSEM ended on 31 March 2026. On 15 July, the Cabinet approved the Mobile Phone Manufacturing Scheme with an outlay of ₹62,500 crore, running from FY2026-27 to FY2030-31.

Read the incentive structure and you can see exactly which lesson was drawn from version one. Base support is 2.25 to 5 per cent on eligible sales, lower and more differentiated than PLI 1.0's rates. Layered on top is up to 1.5 per cent tied specifically to domestic sourcing of key components and sub-assemblies, plus an additional 3 per cent for Indian brands doing product design and R&D.

That third bucket is the tell. PLI 1.0 rewarded volume, and India got volume. Smartphones became the country's single largest export category in calendar 2025 at ₹2.62 lakh crore, overtaking diesel and cut diamonds. What volume did not reliably buy was value capture. MPMS targets patents, design and domestic sourcing directly, which is another way of saying the government has stopped assuming that deeper value addition follows assembly on its own. The projected outcome is ₹39 lakh crore of cumulative production and about 60,000 direct jobs.

The same logic runs through the Electronics Components Manufacturing Scheme, launched in April 2025 at ₹22,919 crore and raised to ₹40,000 crore in the FY27 Budget after investment commitments arrived at roughly double the target.

The number nobody wants on a slide

Here is the awkward one. Under the revised national accounts series with 2022-23 as base year, manufacturing's share of total gross value added was 14.8 per cent in 2025-26, against 14.7 per cent in 2022-23. Manufacturing GVA grew a healthy 10.7 per cent in FY26, with a four-year CAGR of 10.88 per cent. Yet the government's own August 2026 reply to the Lok Sabha conceded that the data shows no significant change in manufacturing's share.

Five years, ₹2.40 lakh crore of induced investment, and the structural needle has barely twitched. The 25 per cent ambition that has anchored Indian industrial policy for over a decade remains a long way off.

There are honest explanations. Services grew faster, at 9.1 per cent in FY26. Capacity built in 2024 and 2025 has not fully ramped. And composition is improving even where share is not: medium- and high-technology industries now account for 46.3 per cent of manufacturing value added, according to the Economic Survey 2025-26.

What to watch next

The critiques are getting sharper and better evidenced. A February 2026 study by the Centre for Digital Economy Policy Research found that 77 per cent of India's electric two-wheeler exports came from non-PLI models, despite PLI-approved products enjoying a 13 to 16 per cent cost advantage. It also noted that auto PLI disbursement stood at ₹2,321.94 crore against a cumulative target of ₹3,754 crore by December 2025. Scale-based eligibility thresholds, the study argued, rewarded incumbents and sidelined the firms actually filing patents.

That is precisely the flaw the 3 per cent design-and-R&D bonus in MPMS is meant to address. Whether a bonus is enough to change corporate behaviour, or whether the eligibility rules themselves need rewriting, is the live question for whatever gets called PLI 3.0.

Three things are worth tracking over the next eighteen months. Whether MPMS disbursement runs closer to its outlay than LSEM's 58 per cent. Whether the ECMS component ecosystem finally lifts domestic value addition in handsets out of the 20 to 25 per cent band where it has been stuck. And whether the ACC re-tender, now pointed at grid storage where India has a genuine demand pipeline, converts allocation into commissioned gigawatt-hours.

The recalibration is real, and to the government's credit it is being done with the numbers on the table rather than behind them. That is more than most industrial policy anywhere gets.

Sources

1. Press Information Bureau — “PLI Schemes Attract Over ₹2.40 Lakh Crore Investment, Generate More Than 14.15 Lakh Jobs”, Ministry of Commerce & Industry, 21 July 2026 (sector-wise investment, employment and export annexures) — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2287008

2. Press Information Bureau — “Cabinet approves Mobile Phone Manufacturing Scheme (MPMS)”, 15 July 2026 — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2284789

3. DD News — “Centre strengthening supply-chain resilience across critical sectors: Piyush Goyal” (cumulative disbursement of ₹35,354 crore; 892 approved applications) — https://ddnews.gov.in/en/centre-strengthening-supply-chain-resilience-across-critical-sectors-piyush-goyal/

4. Business Standard — “Budget sends mixed signals on PLI push across key manufacturing sectors”, 4 February 2026 — https://www.business-standard.com/economy/news/budget-sends-mixed-signals-on-pli-push-across-key-manufacturing-sectors-126020400022_1.html

5. Business Today — “Union Budget 2026: PLI Auto allocation doubled to Rs 5,940 crore; battery scheme sees steep cut”, 1 February 2026 — https://www.businesstoday.in/latest/economy/story/union-budget-2026-pli-auto-allocation-doubled-to-rs-5940-crore-battery-scheme-sees-steep-cut-514059-2026-02-01

6. Forbes India — “Budget 2026: Allocation for PLI schemes drops by 3% to Rs 15,500 crore”, 1 February 2026 — https://www.forbesindia.com/article/budget-2026/budget-2026-allocation-for-pli-schemes-drops-by-3-to-rs-15500-crore/2990962/1

7. IEEFA — “Assessing India’s incentive scheme to enhance the battery manufacturing ecosystem” (ACC PLI commissioning status) — https://ieefa.org/resources/assessing-indias-incentive-scheme-enhance-battery-manufacturing-ecosystem

8. Saur Energy — “MHI Invites Global Bids to Build 10 GWh ACC Battery Manufacturing Capacity”, 16 July 2026 — https://www.saurenergy.com/solar-energy-news/mhi-invites-global-bids-to-build-10-gwh-acc-battery-manufacturing-capacity-12170119

9. ANI — “Manufacturing GVA grows 10.7% in FY26, govt cites reforms to strengthen sector”, 12 August 2026 (manufacturing share of GVA) — https://www.aninews.in/news/business/manufacturing-gva-grows-107-in-fy26-govt-cites-reforms-to-strengthen-sector20260812173715/

10. Press Information Bureau — Economic Survey 2025-26, industrial performance highlights — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2219990

11. Business Standard — “Auto PLI scheme distorted e2w market, excluded innovators: C-DEP report”, 27 February 2026 — https://www.business-standard.com/industry/auto/auto-pli-scheme-distorted-e2w-market-excluded-innovators-c-dep-report-126022700618_1.html

12. Outlook Business — “Auto PLI Cost Advantage Used To Capture e2W Domestic Market Than Build Export-Ready Platforms: C-DEP” — https://www.outlookbusiness.com/economy-and-policy/auto-pli-cost-advantage-used-to-capture-e2w-domestic-market-than-build-export-ready-platforms-c-dep

13. IBEF — “Union Budget 2026-27, Highlights and Economic Impact” (ECMS outlay raised to ₹40,000 crore) — https://www.ibef.org/economy/union-budget-2026-27

14. Ministry of Textiles — PLI for Textiles official portal (scheme amendments and application rounds) — https://pli.texmin.gov.in/

15. Outlook Business — “PLI schemes led to investments of over Rs 2.40 lakh cr until March 2026”, 21 July 2026 — https://www.outlookbusiness.com/news/pli-schemes-led-to-investments-of-over-240-lakh-cr-until-march-2026