Direct benefits from production-linked incentive (PLI) schemes for micro, small and medium enterprises (MSMEs) have been uneven and mostly indirect, according to a mid-course assessment by NITI Aayog and the Indian Institute of Management (IIM) Ahmedabad.
This comes even as the schemes saw substantial investment and production across 14 manufacturing sectors.
As of March 2026 (midway through the PLI programme), the schemes had attracted ₹2.4 trillion in investment (76 per cent of the full-tenure target) and generated production was worth ₹22.66 trillion (64 per cent of target).
Employment, however, stood at only 849,000 — just 28 per cent of the target of around 3.02 million.
Incentives disbursed were ₹35,354 crore, or 18.5 per cent of the total outlay of about ₹1.91 lakh crore.
The report notes that PLI schemes were never designed primarily for MSME schemes.
Their benefits to smaller enterprises are expected to flow mainly through supply-chain linkages, ancillary manufacturing, technology diffusion and market access created by larger anchor firms.
Realising these benefits, the report says, will require complementary interventions on technology, finance, skills and market access.
Sectoral picture for MSMEs
In pharmaceuticals, large firms accounted for around 61 per cent of production under the scheme.
Mid-sized companies performed reasonably well, but MSMEs recorded more modest gains in production, employment and especially exports.
The assessment points to structural constraints of scale and market access that smaller firms face in converting incentives to competitive growth.
White goods (air conditioners and LED lights) stand out as a relatively positive case. The scheme saw participation from 26 MSME applicants.
More significantly, domestic value addition (DVA), the share of a product’s value created within India for white goods rose from about 20 per cent in FY20 to 55 per cent by FY25. This came after a boost in local manufacturing of critical components, such as compressors, copper tubes, motors and electronic parts.
This is one of the clearer examples of PLI supporting a broader industrial ecosystem beyond final assembly.
In telecom and networking products, both MSME and non-MSME beneficiaries recorded growth in sales and exports.
However, the scheme does not mandate DVA, allowing firms to import components, assemble in India and still claim incentives.
This limits the extent to which increased manufacturing translates into opportunities for domestic component suppliers.
In food processing, overall performance was reasonably positive, driven largely by bigger companies. However, MSMEs making innovative or organic products — a separate category under the scheme — recorded more uneven results. This reflects challenges of scale, access to capital and market reach.
The report highlights several important gaps from an MSME perspective. There is no consolidated cross-sector assessment of how many MSME suppliers actually benefited from PLI-driven demand.
It also does not systematically track whether micro enterprises grew into small ones, or small enterprises into medium ones, because of orders from PLI beneficiaries.
Comparable data on procurement from Indian MSMEs and on technology absorption or productivity gains among suppliers is also limited.
These are gaps in the evidence presented rather than definitive proof that such benefits failed to materialise, the assessment notes.
The Federation of Indian Micro and Small & Medium Enterprises (FISME) said NITI Aayog’s assessment demonstrates that PLIs can stimulate investment and industrial scale.
However, the next challenge is to ensure that the resulting manufacturing expansion also creates opportunities for existing MSMEs.
“India needs an industrial policy that rewards enterprises not merely for remaining small, but for becoming large, more productive and internationally competitive,” Anil Bhardwaj, secretary general, FISME said.
“The next generation of PLIs should combine support for large anchor investments with explicit incentives for supplier development, technology absorption and enterprise scaling. Its success should be measured not only by the production of beneficiary firms but also by growth of the domestic industrial ecosystem,” he added.
