The Budget has marginally pared overall allocations for production-linked incentive (PLI) schemes in FY27, while sharply raising support for automobiles and white goods, signalling a recalibration within its manufacturing push rather than a broad-based expansion of incentives.
Officials said the moderation in the overall PLI envelope should not be read as a policy retreat. Instead, it reflects the transition from announcement-led incentives to payout-linked spending, where allocations rise or fall depending on actual production achieved by firms. As schemes mature, budgetary provisions increasingly mirror claims expected to be lodged, rather than headline commitments made at the time of launch.
The Budget has earmarked Rs 15,541 crore for PLI schemes, around 3% lower than the Rs 16,072 crore provided in the revised estimates for FY26.
The largest increase is for automobiles and auto components, where allocations have risen to Rs 5,940 crore, nearly double the FY26 level. While officials said the higher outlay coincides with the scheme entering peak payout years, data on performance suggest the increase also reflects delayed incentive claims rather than a sharp improvement in outcomes.
Rs 25,938-crore auto PLI scheme
The Rs 25,938-crore auto PLI scheme has been among the weaker performers within the broader programme. Several participants failed to meet prescribed investment, domestic value addition or incremental sales targets in the initial years, resulting in no incentive payout in the first targeted year and only a modest rise thereafter.
Incentives under the scheme are linked to incremental sales achieved in the previous year, and the sharper provisioning for FY27 factors in a backlog of expected claims.
In FY25, the government disbursed Rs 322 crore relating to FY24 incremental sales to four companies. For FY25 incremental sales, incentive payouts had reached Rs 1,999.94 crore to five approved applicants as of December 2025.
This remains well below initial projections, with cumulative disbursements of around Rs 2,500 crore against an estimated Rs 10,000 crore that was expected to be paid out by FY25. The slower ramp-up led the government to extend the scheme’s validity by one year to FY29.
Despite this, investment commitments under the auto PLI remain strong. Of the 82 approved applicants, 72 have committed investments, though only 18 have so far met the required thresholds for investment and domestic value addition. Industry executives said the requirement of a minimum 50% domestic value addition has raised localisation but lengthened gestation periods, particularly for advanced automotive technologies.
In contrast, electronics and IT hardware — among the earliest and most visible PLI beneficiaries — has seen allocations fall to Rs 1,527 crore from about Rs 7,000 crore in FY26 revised estimates. Officials attributed this to the nearing completion of the original six-year large-scale electronics manufacturing PLI, which ends in March 2026, and said a successor framework is under consideration.
Allocations for pharmaceuticals
Allocations for pharmaceuticals, including bulk drugs and medical devices, have remained broadly unchanged at around Rs 2,500 crore, while telecom and networking products received Rs 1,950 crore, broadly in line with last year. White goods saw a sharp increase, with allocations tripling to Rs 1,004 crore, reflecting a push to deepen domestic component manufacturing in air conditioners and LED lighting.
Smaller schemes covering specialty steel, drones, textiles and advanced chemistry cell batteries have been retained.