Minimalist IAS
2025 GS Paper III

UPSC CSE (Main) 2025 · GS Paper III · Question 12

Discuss the rationale of the Production Linked Incentive (PLI) scheme. What are its achievements? In what…

Syllabus line: Liberalisation & industrial policy — “Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.”

GS Paper III 2025 · Q12

15 marks · 250 words Liberalisation & industrial policy

Discuss the rationale of the Production Linked Incentive (PLI) scheme. What are its achievements? In what way can the functioning and outcomes of the scheme be improved?

Approach · directive: “discuss / what / in what way”

What it asks · Explain why PLI was introduced, what it has delivered, and what design and implementation changes would improve its results.

The question has 3 parts — answer each

  1. Discuss the rationale of the PLI scheme
  2. Identify its achievements
  3. Explain in what way its functioning and outcomes can be improved

Open with · Launched from 2020 across 14 sectors, the PLI scheme pays incentives on incremental sales of goods made in India — rewarding output rather than inputs.

Cover

  • Rationale: scale and cost disadvantages against East Asian rivals, heavy import dependence (electronics, APIs, solar modules), need for manufacturing jobs and exports.
  • Rationale: attract global champions amid ‘China plus one’, integrate into value chains, build strategic capacity (batteries, drones, telecom).
  • Achievements: by 31 December 2025, investment above ₹2.16 lakh crore, production and sales above ₹20.41 lakh crore, and 836 approved applications.
  • Sector gains: mobile phones turned India from importer to exporter; bulk-drug capacity in pharma; Indian food brands abroad.
  • Concerns: uneven uptake (slow in textiles, specialty steel, battery cells), low domestic value addition in assembly, gains concentrated in a few large firms, disbursal delays.
  • Improvements: link incentives to value addition and local sourcing, extend to labour-intensive sectors and component makers, faster and simpler disbursal.
  • Complements: input-tariff rationalisation, logistics and power costs, labour codes, R&D support; independent evaluation and clear sunset clauses.

Close with · PLI has shown that targeted, output-linked support can move investment; its next phase must deepen value chains and jobs, not just final assembly.

Add value (verified)

Question: UPSC's CS (Main) 2025, GS Paper III — paper ↗. Approach: Minimalist IAS, checked 30 Sept 2026 (how we verify) — UPSC publishes no model answers. ·

Model answer · 285 words (UPSC limit 250) · Minimalist IAS

Launched from 2020 across 14 sectors, the PLI scheme pays incentives on incremental sales of goods made in India for a fixed period — rewarding output rather than inputs.

Rationale

  • Scale and cost gaps: Indian manufacturing lacked the scale, logistics and power costs to match East Asian rivals; heavy import dependence in electronics, bulk drugs and solar modules exposed supply chains.
  • Timing: the 'China plus one' shift after the pandemic offered a chance to attract global champions and plug into value chains.
  • Strategic capacity: batteries, drones, telecom gear and semiconductors matter for security as well as growth.
  • Design logic: paying only on realised sales limits the risk of subsidy without output, unlike upfront capital subsidies.

Achievements

  • Scale: by 31 December 2025, investment above ₹2.16 lakh crore, production and sales above ₹20.41 lakh crore, 836 approved applications and over 14.39 lakh direct and indirect jobs.
  • Mobile phones: India turned from a net importer into a major exporter, with global brands assembling here.
  • Pharma and food: bulk-drug and API capacity reduced import dependence; Indian food brands expanded abroad.

Concerns and improvements

  • Uneven uptake: slow in textiles, specialty steel and battery cells; assembly-heavy sectors show low domestic value addition; gains concentrated in a few large firms; disbursal delays.
  • Link incentives to value addition and local sourcing, extend support to component makers and labour-intensive sectors, and simplify and speed up disbursal.
  • Complements: rationalise input tariffs, cut logistics and power costs, implement the labour codes, fund R&D and build skills alongside plants.
  • Discipline: independent evaluation, sunset clauses and transparent sector-wise data, so that support stays temporary and performance-based.

PLI has shown that output-linked support can move investment; its next phase must deepen value chains and jobs, not just final assembly.

Written by Minimalist IAS from facts checked at source (how we verify) — a little fuller than exam length, so every part of the question is covered; in the hall, keep the structure and trim the detail. UPSC publishes no model answers: compare your structure and coverage with this, then write your own.

Also asked on this syllabus line

All questions on Liberalisation & industrial policy →

Build the base: Prelims PYQs on this