India's $23 billion gamble goes down the drain—Chinese firms refuse to play along, leaving Europe, the US, Japan, and South Korea reeling.

In March 2025, Reuters cited sources in New Delhi stating that India has quietly terminated its "Production Linked Incentive (PLI) Scheme." Launched in 2020, this program had a total budget of $23 billion, covering 14 key industries, aiming to lure companies to shift production from China to India through cash subsidies.

However, by October 2024, participating firms had achieved only 37% of their production targets. Actual subsidy disbursements amounted to less than 8% of the allocated budget—approximately $17.3 billion. The share of manufacturing in GDP not only failed to reach the target of 25%, but instead declined from 15.4% in 2020 to 14.3%.

The initiative was launched during the pandemic era, as India observed Western, Japanese, and South Korean efforts to implement a "China plus one" strategy aimed at diversifying supply chains. Seizing the moment, India introduced the PLI scheme, offering incentives of 4%–6% on incremental sales, hoping to attract foreign investment for factory construction. The plan covered 14 sectors including smartphones, pharmaceuticals, automobiles, and renewable energy, with the goal of transforming India into the "second global factory."

A flood of Japanese, South Korean, and Western enterprises rushed to invest in India—but quickly realized that applying for subsidies was nothing short of a farce. The application process required approval from five different departments and went through 12 bureaucratic stages, taking an average of 18 months. One U.S.-based food processing company complained: "By the time we get approval, the market has already changed."

Even more shocking was the reality on the ground: Indian factories experience an average of six hours of power outages per day, and logistics costs are four times those in China. Stable electricity and efficient logistics networks—essential for modern manufacturing—are nearly nonexistent in India. Furthermore, only 15% of Indian workers have received vocational training, and there is a shortage of over a million skilled technicians. Foreign machinery often sits idle after arrival because local workers cannot operate it.

India had hoped Chinese enterprises would send large numbers of engineers and technical personnel to train local talent. But to their dismay, Chinese firms showed no interest. Foxconn repeatedly requested mainland engineers to be dispatched to India, but responses were minimal.

Apple has built factories in India, yet the yield rate for high-end models remains 30% lower than in China. Subsequently, Tim Cook explicitly stated, "India cannot replace China." SoftBank’s $500 million subsidy application stalled for 14 months at India’s environmental agency before being abandoned altogether. Samsung does operate factories in India, but mainly produces mid-to-low-end devices—the high-end capacity remains concentrated in China and Vietnam.

Ultimately, India’s $23 billion "bet on manufacturing" ended in failure. Not only did it expose deep-rooted structural issues within the country, but it also revealed the illusion of merely copying China’s strategic approach. Europe, the US, Japan, and South Korea attempted to transfer supply chains via subsidies and pressure, but failed to recognize the depth of integration and operational efficiency embedded in China’s supply chain. The result? Massive losses all around. Everyone learned a harsh lesson.

Original source: toutiao.com/article/1860963807073280/

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