India's Rs 2,700-crore MedTech push: What's changing under PLI 2.0?

India's medical device industry is getting another opportunity to strengthen its domestic manufacturing base, with the government extending the Production Linked Incentive (PLI) Scheme for Medical Devices to 2035-36 and inviting fresh applications under its second phase, PLI-MD 2.0.

With an estimated outlay of Rs 2,700 crore, the revised scheme signals a shift in policy priorities: from encouraging the manufacture of finished medical devices to building a stronger domestic ecosystem for critical components, advanced technologies and indigenous supply chains.

The changes could affect the industry, from small component manufacturers and large medical technology companies to hospitals, diagnostic centres and patients.

Easier eligibility conditions

The biggest change is relaxed eligibility conditions. The government has discontinued the minimum sales threshold required to claim incentives and reduced the minimum investment requirement. Companies can also submit multiple applications across one or more target segments.

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These changes address some of the constraints faced under the first phase, potentially making the scheme more accessible to smaller manufacturers and companies planning new manufacturing facilities.

Applicants will have three years to establish their facilities. The revised framework covers four segments: medical consumables, disposables and implants; critical components; high-end devices with nascent domestic manufacturing; and high-end devices currently only assembled in India.

Indicative tapering incentives average around 5 per cent for the first segment, 9 per cent for critical components and nascent high-end devices, and 6 per cent for devices currently assembled domestically.

Opportunity for MSMEs, component manufacturers

This could be the most significant opportunity under PLI-MD 2.0.

India's dependence on imported components remains a structural weakness, even as domestic manufacturing of finished medical equipment has expanded. The higher incentive allocation for critical components is intended to address this gap.

Manufacturers of imaging components, medical-grade electronics, sensors, ultrasound transducers, precision-engineered parts and other specialised components could find opportunities to become suppliers to established medical device companies.

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For MSMEs, the reduced investment threshold could lower the initial entry barrier. The real opportunity, however, will depend on their ability to meet international quality standards, acquire technology and establish commercially viable manufacturing operations.

Investments in medtech sector

The extended scheme provides a longer policy horizon for companies considering investments in India's medical technology sector.

The focus on high-end equipment, including 3T MRI, PET-CT systems, ultrasound probes and consoles, and high-throughput in-vitro diagnostic analysers, could attract investments in technologies that are currently imported or only partially manufactured domestically.

For multinational companies, India could become a more attractive manufacturing and sourcing destination. For domestic investors, the opportunity lies in building capabilities across the medical device value chain rather than limiting operations to assembly.

However, incentives will need to be supported by technology partnerships, skilled manpower, testing infrastructure, regulatory clarity and reliable access to raw materials.

Benefits for healthcare providers

The potential benefits for healthcare providers and patients are significant, although they are unlikely to materialise immediately.

Greater domestic manufacturing could improve the availability of medical equipment, spare parts and after-sales services while reducing exposure to international supply-chain disruptions.

Increased competition could also put downward pressure on equipment prices over time. Hospitals and diagnostic centres could benefit from more competitive procurement options, while patients may eventually gain from improved access to advanced diagnostic and treatment technologies.

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However, lower manufacturing costs do not automatically translate into lower patient bills. The extent to which consumers benefit will depend on competition, procurement practices and pricing across the healthcare delivery chain.

Industry welcomes PLI 2.0

The Association of Indian Medical Device Industry (AiMeD) has welcomed PLI-MD 2.0, describing it as an important step towards building a globally competitive and self-reliant MedTech ecosystem.

Its Forum Coordinator, Rajiv Nath, said the industry had been assured that the limitations encountered under PLI 1.0 were being addressed. He also welcomed the fresh application opportunity, coming soon after the invitation under the Strengthening of Medical Devices Industry (SMDI) scheme.

But the association believes incentives alone cannot transform the sector.

Nath estimates that India's medical device imports could exceed Rs 1 lakh crore this year. He argues that the country needs a broader policy framework encompassing tariff rationalisation, a dedicated medical devices law, procurement preference for genuine domestic manufacturers and balanced trade margin policies.

Beyond production numbers

The first phase reportedly resulted in production worth more than Rs 16,000 crore and domestic manufacturing of over 60 high-end medical devices and components.

The next challenge is to move beyond production numbers towards meaningful domestic value addition, technology ownership, innovation and export competitiveness.

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PLI-MD 2.0 offers manufacturers a more flexible framework and investors a longer horizon. Its success, however, will be measured by whether India can move from assembling imported technologies to designing and manufacturing globally competitive medical devices and their critical components.

For the industry, the opportunity is significant. For consumers, the promise is better access and potentially lower costs. For policymakers, the real test is whether incentives can translate into a sustainable, globally competitive Indian MedTech manufacturing ecosystem.