The problem of India’s huge subsidies for manufacturing

In order to revitalize the manufacturing industry, the Indian government’s subsidy expenditure has continued to increase. Since 2020, a total of 1.46 trillion rupees have been invested in enterprises. Although certain results have been achieved, such as Apple’s iPhone output value exceeding 10 billion US dollars in India in 2024, it is still far from the manufacturing share target set by the Indian government.

The core content of the Indian government’s industrial revitalization policy “Make in India” is the production-linked incentive (PLI) program introduced in 2020. The program provides subsidies based on the company’s output or sales increase. In order to promote investment strategically, it is implemented in 14 areas such as electronics, automobiles and auto parts.

According to data released by the Indian government in November 2024, the cumulative expenditure based on the “production-linked incentive program” has reached 1.46 trillion rupees. The article also emphasized the achievements, saying that by providing subsidies, the relevant gross domestic product and sales reached 12.5 trillion rupees and 950,000 jobs were created.

Apple is a successful case of a company using subsidies.

Ashwini Vaishnaw, India’s Minister of Electronics and Information Technology, posted on X (original Twitter) in November that Apple produced the equivalent of $10 billion worth of iPhones from April to October 2024, a year-on-year increase of 37%. Of these, $7 billion of iPhones were used for exports. He also proudly stated that this was a “new milestone” in the “production-linked incentive program.”

But India is still far from its goal. The Indian government had proposed a goal of increasing the share of manufacturing in gross domestic product (GDP) to 25% by 2022, but as of 2023, this proportion was only 14%. The trade deficit problem has not been resolved for many years.

Due to concerns about economic security risks, many multinational companies have moved their production bases from China to India. To take advantage of this favorable wind, India must also improve infrastructure such as logistics and power grids, and modify complex employment systems.