India Abandons $23 Billion Plan to Compete with Chinese Factories

The Indian government has decided to end the $23 billion productivity incentive program it launched four years ago, which aimed to lure global companies away from China and boost domestic manufacturing.

The decision comes after the plan failed to achieve its goals. The total production value of participants exceeded only 37 percent of the target, and the government disbursed only 8 percent of the promised incentives, according to government documents reviewed by Reuters.

India launched the productivity incentive program in 2020 as part of its strategy to become a global manufacturing hub, especially as the trade war between Washington and Beijing escalated and global companies sought to diversify their supply chains away from China. However, the results were disappointing, with the manufacturing share of the Indian economy declining from 15.4 percent at the program’s launch to 14.3 percent today. According to government sources, excessive bureaucracy and regulatory restrictions have hampered the program’s efficient implementation, despite New Delhi’s attempts to mitigate these constraints by extending some deadlines and increasing the pace of incentive disbursements.