PM Modi says ‘production-linked punishment’ era once held back Indian industry; pegs India as world’s fastest-growing economy

Prime Minister Narendra Modi on Friday said India had moved from an era of “Production Linked Punishment” under the “Licence Raj government” to one where the government incentivises higher production, citing the performance of the production-linked incentive (PLI) scheme as evidence of the country’s changing economic approach.

Speaking at the Economic Times World Leaders Forum in New Delhi, Modi said the world was facing growing uncertainty, with resources being weaponised and distrust becoming the prevailing environment, but India was emerging as “the light at the end of this tunnel” and a bright spot for growth and hope.

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“IMF predicts India to continue to lead as the world's fastest growing economy, and India is leading all efforts to make that happen,” Modi said.

The Prime Minister said India’s future could not be built in isolation, arguing that the country had adopted an approach of “leading with all” amid global upheavals.

“In the past few years, the world has seen several ups and downs, and these experiences have made one thing clear: a country's future cannot be built in isolation,” Modi said.

He said India was pursuing next-generation reforms across policy and governance, with a focus on securing the country’s future and improving ease of living.

“Reform is not a compulsion for India but its commitment,” Modi said. “They are our commitment. They are our conviction.”

From ‘production-linked punishment’ to PLI

Turning to India’s industrial policy, Modi drew a contrast between what he termed the previous ‘Licence Raj’ governments and the currently ruling NDA government’s PLI programme, describing the former as a system in which companies could be penalised for exceeding prescribed production limits.

“Production linked punishment: PIP—did you hear about this?” Modi said, contrasting it with the PLI framework. “PIP and PLI define two different timelines in India.”

“Today’s younger generation will be surprised to hear that there was a time in our country when if a company produced more than the prescribed limit, it was punished. This was the PLP, or Production Linked Punishment, model of the earlier licence raj governments,” he said.

He spoke of instances where factories that increased production in response to higher demand received notices and were compelled to destroy products rather than sell them in the market.

Modi also targeted critics of the Make in India and Atmanirbhar Bharat initiatives, saying those who mocked the campaigns were rooted in the same thinking that had prevailed during the ‘Licence Raj’.

“Those who make fun of the Make in India and Atmanirbhar Bharat campaigns today are rooted in the same thinking of the past — PLP, or Production Linked Punishment,” he said.

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According to Modi, the earlier approach was driven by a mindset that sought to perpetuate shortages and keep citizens dependent on the government.

“Keeping the citizens of the country in deprivation was their policy. They wanted people to stand before them with folded hands and ask for things,” he said.

Modi said economic reform must begin with a change in mindset, contrasting the earlier approach of penalising additional production with the current policy of rewarding it.

“Every reform begins first with a reform in the way you think — the mental range within which you operate. It begins with reforming this mindset. Where earlier there was punishment for increasing production, today our government is giving incentives for increasing production. And the world is seeing the success of the PLI scheme today.”

Citing the PLI scheme’s performance, Modi said it had attracted around ₹2.5 lakh crore in actual investment, while more than ₹22 lakh crore worth of production and sales had taken place.

“More than Rs 15 lakh crore worth of exports have taken place, and more than 14 lakh direct and indirect jobs have been created. And I will remind you again, these figures are from just one scheme,” he said.

Modi said India was focusing on seven sectors, including manufacturing, technology and innovation, and the green and blue economy, while pursuing reforms in governance and ease of living.

Defence exports surge 55 times since 2014: Modi

Modi said India’s defence sector had also undergone a significant transformation over the past decade, with reforms and a greater focus on domestic production driving a sharp rise in defence exports.

“Compared with 2014, our defence exports are now 55 times higher,” Modi said.

He said the impact of reforms was often not immediately apparent because, over time, they became embedded in everyday life.

“Many times, reforms become so integrated into our daily lives that we do not even notice them,” Modi said.

The Prime Minister said reforms aimed at improving ease of living over the past 10-12 years had transformed the lives of citizens, particularly the middle class.

“The reforms India has undertaken over the past 10-12 years to improve ease of living have transformed the lives of people, especially the middle class,” he said.

“Many of these changes are still a dream in several developed countries,” Modi added.

‘Permitted unless prohibited’: Modi lays out regulatory overhaul

Modi said the government was seeking to fundamentally alter India’s regulatory philosophy, moving away from a system where businesses and citizens needed government permission unless an activity was expressly allowed.

“For this, in 21st-century India, we are not just changing regulations; we are changing the entire philosophy of regulation,” Modi said.

“Earlier, the approach to regulations was ‘prohibited unless permitted’ — meaning you could not do something unless the government gave you permission. We are changing this approach to ‘permitted unless prohibited’. That means, for anything that is not explicitly prohibited by law, there should be no need to seek permission at every step.”

He said the shift was intended to recast the relationship between the state, citizens and businesses around trust rather than suspicion.

“The relationship between the government and citizens should be based not on suspicion, but on trust,” Modi said.

Citing the Jan Vishwas Bill, he said several offences had been decriminalised and that in some cases imprisonment had been replaced with financial penalties.

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“In recent years, we have removed more than 40,000 compliances and scrapped more than 1,500 outdated and redundant laws,” Modi said, adding that the reforms had reduced the burden on industries and businesses.

He also cited the Bankers’ Books Evidence Bill, passed during the Monsoon Session, as an example of governance reform. Modi said the legislation replaced a 19th-century British law and gave legal recognition to digital records maintained by banks, reducing legal complications and improving transparency.

Modi pointed to the deregulation of geospatial data as another example of how policy changes could open up new areas for private enterprise.

“Until a few years ago, even making a map of the country was illegal,” he said, adding that Indians earlier needed permission for mapping work even as foreign satellite technology could be used to map parts of the country.

“We deregulated geospatial data, and today geospatial data has become a foundation for many startups,” Modi said.

He said the relaxation of rules had also helped expand the use of drones across sectors.

“Today you can see the growing utility of drones — in agriculture, defence, delivery, filming and content creation. None of this would have been possible if the government had not reformed the rules governing the sector,” he said.

“Earlier, drone flying in the country was tightly restricted by regulations. We freed the sector from these restrictions, and today India’s drone industry is moving forward with unprecedented momentum.”

Digital infrastructure brings services to citizens

Modi said the impact of reforms could also be seen in the expansion of digital infrastructure and the easier delivery of everyday services.

“Today, India has some of the world’s cheapest data. We are manufacturing affordable and good-quality smartphones,” he said, adding that India was among the countries witnessing the fastest 5G rollouts globally.

He said Aadhaar had been linked with banking, mobile connectivity and government services, enabling tools such as e-KYC and digital authentication.

Modi said banking services had also become more accessible, with citizens no longer required to visit branches for several routine transactions.

“Today, if you want to open a bank account, you do not even need to visit a bank. The government has brought banking services to your doorstep,” he said.

“Whether you need to pay a bill or book a ticket, there is no need to visit a government office. All of this can be done online.”

He also pointed to changes in the income-tax filing process, saying the system now pre-fills much of the information required from taxpayers.

“Filing income tax returns has also become easier. The system is designed so that maximum information is pre-filled in the form. You verify the information, add anything if required, and submit it. Your work is done,” Modi said.

He added that tax refunds that previously took months were now being credited within a few days.

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Railways, border infrastructure show governance shift

Modi said governance reform also meant building systems designed to reduce human error and improve the reliability of public services, citing changes across the railway network.

“Governance reform also means building systems that are sensitive to every human life and every minute of their time,” he said.

He said more than 6,500 railway stations now had electronic interlocking systems, while more than 10,000 level-crossing gates were being connected with such systems.

Modi said the government had also eliminated around 9,000 unmanned railway crossings that existed when it came to power in 2014.

“We eliminated these unmanned crossings in mission mode over 10 years,” he said.

He further cited the Delhi-Meerut Namo Bharat corridor, where trains operate at speeds of up to 160 kilometres per hour, as an example of the transformation in public infrastructure.

“More than 4 crore passengers have travelled on it so far,” Modi said, adding that the corridor had recorded a punctuality rate of 99.9%.

He said the Delhi Metro had also achieved a 99.9% punctuality rate, which he said was comparable with metro systems in New York, Hong Kong and Paris.

“This is not just the story of a metro and Namo Rapid Rail running on time. It is the identity of an India that is changing with the times,” Modi said.

Modi also said the government had changed its approach to infrastructure development in border areas, rejecting the earlier view that roads and other infrastructure could benefit an adversary.

“We changed this mindset. We said border infrastructure is not a weakness; it is the country’s strength,” he said.

He said roads, bridges and tunnels along the borders were being expanded rapidly, with the Border Roads Organisation dedicating 250 infrastructure projects to the nation in 2024-25.

“Amidst it all, the world sees India as the light at the end of this tunnel,” Modi said, adding that the country was being viewed as a “bright spot for growth and hope.”