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India’s factory incentive plan has delivered investment and jobs. The harder test now is whether those factories can design products and build technology inside India.
Key Highlights
India’s Production Linked Incentive programme has helped companies set up plants, raise output and hire workers across 14 sectors. Yet figures published in 2026 show a wide research gap between India and China. That gap could decide whether India becomes a base for product development or remains heavily involved in final-stage assembly.
The short-term gains are visible. Factories create jobs, suppliers receive orders and exports rise. The risk appears later, when Indian companies still need foreign machinery, patents, software or key components to keep those production lines running.
The Press Information Bureau reported on March 27, 2026, that 836 applications had received approval under the PLI schemes. The data covered progress up to December 31, 2025.
For workers, these numbers mean more openings in electronics plants, automobile units, warehouses and component factories. Local firms can also win supply contracts. But a phone assembled in India may still rely on an imported chipset, display, production machine and foreign-owned design.
China’s National Bureau of Statistics said on February 28, 2026, that the country spent 3.926 trillion yuan on R&D in 2025. Spending rose 8.1%, while basic research increased 11.1% to 277.8 billion yuan.
India’s R&D expenditure stood at 0.64% of GDP, according to a PIB release published on February 11, 2026. The gap is large, and it shows up in innovation rankings too.
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India’s 4 listed clusters were Bengaluru, Delhi, Mumbai and Chennai. China had 24, including the Shenzhen-Hong Kong-Guangzhou cluster, ranked 1st globally.
On June 1, 2026, Reuters reported that, according to the OECD, industrial subsidies had reached their post global financial crisis peak. OECD Secretary-General Mathias Cormann argued that prolonged support could create a distortion in competition and lead to support for excess capacity.
India can avoid that trap by holding back part of every PLI payment until a company meets research targets. Patents commercialised in India, researchers hired, imported parts replaced and technology shared with domestic suppliers could count towards payment.
According to LoansJagat, a factory producing more units should not receive the same reward as one that also designs the product, develops local components and helps Indian suppliers enter the value chain. The second factory leaves more knowledge and income inside the country.
A related LoansJagat report covers the role of incentives and public investment in India’s recent manufacturing growth.
PLI has helped India add factories and production. The next round should ask companies to build technology here too. A “No R&D, No Subsidy” clause would tie public money to Indian patents, product design and commercial research.
How Much Investment Has India’s PLI Programme Attracted?
India’s PLI schemes attracted more than ₹2.16 lakh crore by December 31, 2025.
How Much Production Have PLI Schemes Generated?
PLI-backed sectors recorded more than ₹20.41 lakh crore in production and sales.
How Many Jobs Have India’s PLI Schemes Created?
The 14 PLI schemes generated over 14.39 lakh direct and indirect jobs.
How Is India’s Manufacturing Growth Different From China’s Early Industrial Boom?
China expanded exports through large industrial zones, cheaper infrastructure and strong supplier networks. India is growing through services, PLI schemes and selective manufacturing sectors.
Why Does India Spend Less On R&D Than China?
Indian businesses spend less on research, while public funds cover many welfare and infrastructure needs. China ties industrial growth more closely to technology development.
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