It has asked administrative ministries to structure new schemes and incentive programmes for appraisal by the Expenditure Finance Committee in a way that incorporates local value addition, domestic sourcing and manufacturing-linked criteria, they said.
Schemes that do not clearly define these parameters are being sent back for revision.
The move indicates a sharper alignment between government spending and industrial policy objectives, with the Centre striving to ensure that subsidy outlays boost domestic production capacity rather than increase import dependency.
The matter was recently discussed in the context of recent geopolitical disruptions, including the West Asia crisis, during which ministries were asked to assess how incentive schemes could be structured to strengthen supply chain resilience and encourage local production in strategic sectors.
“There was a clear direction that subsidy support must strengthen the domestic manufacturing base and reduce import dependence, especially in areas where production is feasible within the country,” a senior official told ET on condition of anonymity, adding that the objective is to ensure that incentives do not end up reinforcing external dependency.
The ministry will soon send a formal guideline on this, the official added.The exercise is expected to cover sectors such as electronics, clean energy, mobility, automobiles, heavy industry and advanced technology manufacturing, where the government has significantly expanded fiscal support in recent years. India’s broader industrial policy framework already includes instruments such as the Make in India and the Public Procurement Order 2017, both of which seek to promote domestic manufacturing through procurement preference and local sourcing requirements. In addition, production-linked incentive frameworks introduced in recent years link fiscal support to incremental domestic manufacturing and value addition.However, the latest move goes a step further by tightening scrutiny at the approval stage itself.
Instead of leaving localisation requirements to be interpreted during implementation, ministries are now being asked to incorporate them upfront in scheme design and justify any reliance on imports.