5. NITI Aayog Tasks IIM-A to Evaluate PLI Scheme Efficacy

The Union Government has commissioned the Indian Institute of Management, Ahmedabad (IIM-A), under the aegis of NITI Aayog, to conduct a rigorous assessment of the Production Linked Incentive (PLI) schemes following concerns over sluggish disbursement and uneven sectoral performance. • Scope of Study: IIM-A will evaluate all 14 PLI sectors—ranging from electronics to specialty steel— focusing on their actual impact on incremental production, export expansion, job creation, and India’s integration into global supply chains. • Disbursement Gap: A primary trigger for the study is the significant lag in incentive payouts; as of December 2025, only ₹28,748 crore (approx. 15%) of the allocated ₹1.91 trillion had been disbursed, despite the schemes attracting over ₹2.16 trillion in committed investments. • Sectoral Asymmetry: While sectors like large-scale electronics and pharmaceuticals have shown robust progress, others such as high-efficiency solar PV modules and advanced chemistry cell (ACC) batteries have reported zero incentive disbursement so far. • Structural Review: The evaluation aims to determine whether the existing \'incremental output\' model requires restructuring or if certain sectors need a relaxation of investment and turnover criteria to facilitate wider participation, particularly by mid-size firms. • Strategic Re-alignment: Insights from the study will guide NITI Aayog and the Department for Promotion of Industry and Internal Trade (DPIIT) in deciding whether to expand the current outlays or shift focus toward emerging frontier technologies and \'Viksit Bharat\' goals. • Correction of Underperformance: By identifying \'early indicators\' of failure, the government intends to implement remedial measures to ensure that the remaining 85% of the allocated budget effectively translates into a manufacturing-led GDP boost. Key Definitions • Production Linked Incentive (PLI): A performance-linked incentive framework where the government provides financial rewards to companies based on their incremental sales from products manufactured in domestic units over a defined base year. • Incremental Production: The additional output generated by a manufacturer over and above a predetermined baseline, which serves as the primary metric for calculating PLI benefits. Constitutional & Legal Provisions • Article 39(b) & (c): Directive Principles of State Policy (DPSP) that guide the state to ensure the ownership and control of material resources are distributed to subserve the common good and prevent the concentration of wealth. • Entry 52, List I (Union List): Grants Parliament the power to regulate industries, the control of which by the Union is declared by law to be expedient in the public interest. • Fiscal Responsibility and Budgetary Management (FRBM) Act: Relevant for the allocation and management of large-scale industrial subsidies like the ₹1.91 trillion PLI corpus. Conclusion: The engagement of IIM-A represents a shift toward data-driven industrial policy. While the PLI scheme has successfully branded India as a viable manufacturing alternative to China, the \'15% disbursement\' figure highlights a mismatch between policy intent and ground-level execution. The upcoming study is critical to transforming the PLI from a capital-heavy commitment into a high-yield outcome, ensuring that India’s manufacturing growth is both inclusive and globally competitive. UPSC Relevance • GS Paper III (Economy): Central to topics like \'Industrial Policy,\' \'Changes in industrial policy and their effects on industrial growth,\' and \'Mobilization of resources.\' • GS Paper II (Governance): Analysis of \'Government policies and interventions for development in various sectors\' and the role of \'Think Tanks\' (NITI Aayog) in policy evaluation.