China+1 PLI Scheme Access

Why China+1 and PLI Are Converging

The China Plus One strategy — where multinational companies diversify manufacturing and sourcing beyond China to reduce supply chain concentration risk — has moved from a boardroom talking point to an operational reality. India's Production Linked Incentive (PLI) schemes are the primary fiscal tool making this diversification economically attractive.

The convergence is producing measurable results. By March 2025, realized investments under PLI schemes reached approximately INR 1.76 lakh crore (USD 20.3 billion) across 14 sectors, with 806 approved applications. These projects have collectively generated over INR 16.5 lakh crore (USD 190.9 billion) in production and sales output, creating more than 12 lakh direct and indirect jobs.

For foreign companies evaluating India as their "plus one" destination, the PLI scheme is not merely an incentive — it fundamentally alters the cost-benefit calculus of establishing Indian manufacturing operations. The incentives, ranging from 4% to 7% of incremental sales over a five-year period, can offset the initial setup costs that make India less cost-competitive than China on a pure unit-economics basis.

The 14 PLI Sectors: Complete Overview

India has launched PLI schemes across 14 strategic sectors with a total budgetary outlay of INR 1.97 lakh crore (over USD 26 billion). Each sector has its own implementing ministry, eligibility criteria, and incentive structure.

The semiconductor scheme deserves special attention. India has received Union Cabinet approval for four additional semiconductor manufacturing units in Odisha, Punjab, and Andhra Pradesh in 2025, reflecting the government's determination to create a domestic chip ecosystem. The semiconductor PLI offers up to 50% of capital expenditure as a subsidy — the most generous incentive across all PLI sectors.

China+1 Success Stories in India

Apple iPhone Manufacturing

Apple's shift to India is the most prominent China+1 success story globally. Key milestones by 2025:

• Production share: India's share of global iPhone manufacturing rose from less than 1% in 2017 to 17% in 2025, with projections to reach 25-35% by 2026
• Export value: iPhone exports from India reached INR 1.5 lakh crore (approximately USD 17.4 billion) in FY2025, a 76% rise from the previous year
• Historic milestone: India overtook China to become the top exporter of smartphones to the US, with Indian-assembled smartphones accounting for 44% of US imports in Q2 2025
• Tariff advantage: Indian-made iPhones face approximately 10% US import duty compared to up to 30% for Chinese-made units

Apple's success in India has been enabled by its contract manufacturers — primarily Foxconn, Pegatron, and Tata Electronics — all of which have expanded Indian operations under PLI incentives.

Foxconn's Investment Push

Foxconn, Apple's largest assembler, has committed to major Indian investments:

• Display module facility: USD 1.5 billion near Chennai, expected to create approximately 14,000 jobs
• Semiconductor joint venture: USD 433 million JV with HCL Group for a display driver chip plant, operational by 2027
• Strategy: Foxconn has adopted a "China strategy for India" — applying the same supplier ecosystem development approach that built China's manufacturing dominance

Samsung's Noida Mega Factory

Samsung built the world's largest mobile manufacturing plant in Noida, doubling its annual production capacity from 68 million to 120 million phones. The facility produces phones for India and other countries in the SAARC region and beyond, embodying the "Make for the World" strategy that PLI incentives are designed to encourage.

These examples demonstrate that the PLI scheme works best when combined with India's other competitive advantages: a large domestic market, a young workforce, and improving infrastructure. Companies evaluating their FDI strategy for India should view PLI incentives as one component of a broader cost-benefit analysis.

Eligibility Criteria for Foreign Companies

The PLI scheme explicitly welcomes foreign direct investment. Any company registered in India can apply, regardless of the nationality of its parent company. However, several practical requirements must be met:

Entity Structure Requirements

• Indian incorporation mandatory: The applicant must be a company registered under the Companies Act, 2013 — typically a private limited company or a wholly owned subsidiary
• One application per entity: Each company is limited to one application per PLI scheme
• Manufacturing in India: Only manufacturing activities carried out within India qualify for incentives

Financial Thresholds

Each sector has specific minimum investment requirements. These are cumulative investment thresholds over the incentive period, not annual amounts. Companies must demonstrate:

• Minimum investment commitment: Varies by sector (e.g., INR 1,000 crore for large-scale electronics manufacturing, INR 250 crore for auto components)
• Incremental sales targets: Year-on-year growth in production value over a defined base year
• Net worth requirements: Certain schemes specify minimum net worth criteria
• Domestic value addition: Products must meet minimum local value-addition percentages, which vary by sector and increase over the incentive period

Documentation Requirements

The application process requires:

1. Certificate of Incorporation from the Ministry of Corporate Affairs
2. GST registration certificate
3. Import Export Code (IEC) from DGFT
4. Audited financial statements for the last 3-5 years (or projections for new entities)
5. Detailed investment plan — capital expenditure timeline, asset creation schedule, production benchmarks
6. Manufacturing process documentation — technology, equipment, capacity, and value-addition methodology

Application Process: Step-by-Step

The application process varies by sector but follows a general pattern:

Step 1: Identify the Correct PLI Scheme

Match your product category to the relevant sector scheme. Some products may qualify under multiple schemes — choose the one with the most favourable incentive structure and investment threshold for your scale.

Step 2: Establish an Indian Entity

If you do not already have an Indian subsidiary, incorporate one. The SPICe+ form enables simultaneous company incorporation, PAN, TAN, and GST registration. Appoint at least one resident director who has stayed in India for a minimum of 182 days during the financial year.

Step 3: Make the FDI Investment

Bring capital into the Indian entity through FDI channels. File FC-GPR with the RBI within 30 days of share allotment. Ensure the investment route (automatic vs. government approval) is appropriate for your sector.

Step 4: Apply on the Relevant Portal

Each PLI scheme has its own online portal managed by the implementing ministry. The Project Management Agency (PMA) or MeitY receives the application through the portal and issues an acknowledgement within 15 days after prima facie examination.

Step 5: Approval and Commencement

Once approved, the company must meet incremental investment and production targets within the defined timelines. PLI incentives are disbursed annually based on verified incremental sales above the base year.

Step 6: Annual Compliance

Maintain detailed records of production, sales, investment, employment, and domestic value addition. Submit quarterly and annual claims to the PMA. Comply with all standard Indian regulatory requirements including FLA returns, annual MCA filings, and income tax obligations.

Sector-Specific Performance: Where PLI Is Delivering Results

Electronics

Electronics production under PLI support rose from INR 2.13 lakh crore (USD 26 billion) in FY2021 to INR 5.25 lakh crore (USD 63 billion) in FY2025 — a 2.5x increase in four years. India's budget 2026-27 slashed import duties on cell phone and laptop components, with electronics exports projected to cross USD 120 billion by 2025.

Pharmaceuticals

India transitioned from a net importer of bulk drugs (INR 1,930 crore deficit in FY2021-22) to a net exporter (INR 2,280 crore surplus in FY2024-25) under PLI support. This reversal reduced India's dependency on Chinese active pharmaceutical ingredient (API) imports — a core China+1 objective.

Solar PV Modules

Under the PLI scheme for high-efficiency solar PV modules, investments worth INR 48,120 crore have been committed, generating nearly 38,500 direct jobs as of June 2025. This sector demonstrates how PLI can build entirely new domestic manufacturing capabilities.

Auto Components

The auto components PLI attracted approximately INR 29,500 crore (USD 3.5 billion) in investment and generated nearly 45,000 jobs by early 2025. India's existing auto component industry — valued at over USD 70 billion — provides the ecosystem depth that amplifies PLI effectiveness.

Common Pitfalls and How to Avoid Them

• Underestimating domestic value-addition requirements: Many foreign companies initially plan to import most components and assemble in India. PLI schemes require increasing local value addition over time. Build a phased localization plan from day one.
• Missing incremental sales targets: PLI incentives are triggered by year-on-year sales growth, not absolute production. If the market slows or your ramp-up is delayed, you may not meet thresholds. Model conservative scenarios.
• Ignoring state-level incentives: PLI is a central government scheme. State governments offer additional incentives — capital subsidies, land at subsidized rates, power tariff concessions — that can stack with PLI benefits.
• Late application: Some PLI schemes have fixed application windows. Monitor the relevant ministry's announcements and apply during open windows. The 9 government incentives beyond PLI guide covers additional programs.
• Compliance underinvestment: PLI claims require meticulous documentation. Companies that treat compliance as an afterthought face delays and rejections in incentive disbursement. Invest in a dedicated compliance team or engage professional FEMA-RBI compliance support.

Press Note 3 Considerations for China-Based Companies

Companies incorporated in or having beneficial owners from countries sharing a land border with India — including China — face additional restrictions under Press Note 3 of 2020. All FDI from these countries requires prior government approval through the government approval route, regardless of sector.

This means Chinese companies cannot invest in India under the automatic route even in sectors that are otherwise fully open. The practical implications for China+1 strategies include:

• Non-Chinese companies benefit most: Japanese, Korean, European, American, and ASEAN companies implementing China+1 through India face no such restrictions
• Chinese companies face delays: Government approval adds 8-12 weeks to the investment timeline and requires detailed disclosure of beneficial ownership structures
• Indirect investment scrutiny: Investments routed through third countries (e.g., Singapore or Mauritius) by Chinese entities are also subject to Press Note 3 scrutiny

For a detailed analysis, see our guide on FDI from China and Press Note 3.

Key Takeaways

• PLI schemes across 14 sectors with INR 1.97 lakh crore outlay are India's primary fiscal tool for attracting China+1 manufacturing investment. Realized investments have reached INR 1.76 lakh crore (USD 20.3 billion) with over 12 lakh jobs created.
• Foreign companies are fully eligible. Any company registered in India can apply, regardless of parent nationality. The key requirements are Indian incorporation, minimum investment thresholds, and incremental sales targets.
• Apple's India shift is the definitive proof of concept: India now manufactures 17% of global iPhones, with exports reaching USD 17.4 billion in FY2025 and India overtaking China as the top smartphone exporter to the US.
• Incentives range from 4% to 50% of incremental sales or capex, depending on the sector. Electronics, pharmaceuticals, solar PV, and auto components are the strongest-performing sectors.
• Chinese companies face Press Note 3 restrictions, requiring government approval for all FDI. Non-Chinese companies pursuing China+1 strategies have a regulatory advantage in India.