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India’s PLI Capex to Surge To Rs. 1.7 Trillion Annually by FY26: ICRA

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ICRA has recently published the third report in the PLI series, capturing the Production Linked Incentive (PLI) scheme progress and CAPEX deployment over the years. The Government PLI schemes to date have had encouraging bids across sectors. However, the deployment of CAPEX is expected to pick up only in FY24 for more than 80% of the projected investments, based on some recent developments for large-scale projects (such as semiconductors).


Further, Mr. Rohit Ahuja, Head of Research and Outreach, ICRA, says, “Based on our calculations, the annual CAPEX from the PLI schemes are expected to cross Rs 1 trn from FY24 and may peak out at Rs 1.7 trn in FY26. Hence, FY24 could be an inflexion point for a surge in India’s manufacturing CAPEX.”

Capex for current PLI scheme and sectors

Source: ICRA Research, Industry

In some of the sectors (such as mobile phones/electronics, engineering goods, food products, etc.) wherein production has started (over FY22 or H1 FY23), the impact is visible in the surge in export data for these sectors. These can be primarily attributed to PLI schemes for these sectors.

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Semiconductor and ACC batteries form ~70% of the major pending CAPEX deployment. The Indian semiconductor and electronics sector is expected to grow at a CAGR of 30-35% for the next 5 years. Further, regulations by the US to limit exports of semiconductor and chip-making equipment to China will benefit India in the future. Five applicants under the semiconductor and display fabrication PLI scheme are expected to manufacture ~1.2 lakh wafers per month. The government has set up  India Semiconductor Mission to support applicant entities. ACC batteries PLI scheme has been approved by three entities. The government may increase the PLI outlay for the same (as done for the solar module), witnessing additional 40 GWh capacity applications in initial bidding.

The Government is also contemplating  launching PLI schemes for a few more sectors (containers, electrolyser, power transmission equipment, etc.) to ensure manufacturing CAPEX continues to remain elevated beyond FY26. Concludes Mr. Ahuja,“However, in the wake of rising input costs, and unfavourable economic conditions, execution delays in certain sectors could be a concern.”

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