Policy Update
Siddhant Koul
Background and Success of PLI Scheme
The Make India Initiative has propelled electronics manufacturing to grow 7 times and exports to grow 11 times since FY 2014-15. The electronics manufacturing sector has also emerged as a significant source of employment, with a few plants employing more than 5,000 employees at a single location. (MeitY, 2026)
Mobile phone manufacturing has been the key driver of this growth and has emerged as the anchor of India’s electronics manufacturing ecosystem. India is now the world’s second-largest mobile phone manufacturer by volume, with 99.2% of mobile phones used in India being manufactured domestically.(News18,2023)
Smartphones emerged as India’s largest exported product category in 2025, reflecting the growing importance of electronics in India’s export basket. Mobile phones now constitute a major share of India’s electronics production and exports and are playing a critical role in strengthening India’s position in global value chains. (MeitY, 2026)
The Production Linked Incentive Scheme for Large Scale Electronics Manufacturing (PLI-LSEM) whose tenure ended on 31st March 2026 has played a significant role in expanding India’s mobile-phone manufacturing and export capacity. (MeitY, 2026)
Introduction and Background: MPMS
The Mobile Phone Manufacturing scheme, effective from April 1, 2026, shifts policy focus beyond simply assembling handsets in India, as it offers incentives for locally made components, Indian ownership and control of intellectual property, design and R&D capabilities. It replaces the Production-Linked Incentive scheme for large-scale electronics manufacturing, whose tenure ended on March 31, 2026. (MeitY, 2026)
While domestic volumes have shown limited growth in recent years(Business Standard,2026). India’s mobile phone production has been surging, largely because of exports. Kotak highlights that mobile phone production in India has grown at approximately 24 per cent CAGR over 2021-26, primarily driven by rapid export expansion. This is the same trend seen in recent years, where factories in states like Tamil Nadu and Karnataka have become major hubs for exporting smartphones, including iPhones and Android devices.(News18,2023)
This piece argues that MPMS represents a real and necessary shift in policy philosophy, from rewarding volume to rewarding depth. But its eventual success depends on the reliability and trust value that will make the customers choose Indian smartphone alternatives.
Salient Features of the Scheme
The government expects the programme to help nearly double the cumulative value of mobile-phone production over the scheme period. The target is approximately Rs 39 lakh crore, compared with roughly Rs 20 lakh crore under the earlier phase of mobile-manufacturing incentives. (MeitY, 2026)
The plan also seeks to double the value of mobile-phone exports to around Rs 15 lakh crore, from about Rs 7.5 lakh crore achieved under the previous scheme. The main idea is to ensure that a greater share of the value of every phone component, design, engineering, software-linked intellectual property, and manufacturing stays within India.
The Scheme is also projected to generate around 60,000 direct jobs thereby contributing to economic growth, employment generation and strengthening India’s position in the global electronics manufacturing hub.
The Centre’s new scheme is attempting to tackle two unfinished parts of the country’s electronics boom: keeping large scale production growing after the first smartphone production linked incentive (PLI) scheme has run its course, and creating Indian smartphone brands that can compete with foreign companies dominating the domestic market. The five-year scheme tenure shall be from FY 2026-27 to FY 2030-31, split into 2 tracks. The first is designed to succeed the earlier PLI programme, offering manufacturers and electronics manufacturing services (EMS) companies’ incentives for expanding production, while increasingly linking benefits to the domestic sourcing of components. The second sets aside a separate incentive structure for Indian smartphone brands, offering higher support for companies that not only manufacture in the country but keep their intellectual property, management control, design and research and development capabilities in India. (MeitY PIB, 2026)
Keeping the PLI Running (Track 1)
In the first component, a manufacturer must have recorded at least Rs. 10,000 Crore in turnover in FY 2025-26. For existing brands, sales must increase by at least Rs. 5,000 crores over FY26 levels in the first year, with the threshold rising cumulatively to Rs. 10,000 Cr in FY28, growing at a rate of Rs. 5,000 crore every year. Unlike the original PLI, the baseline itself will also move every year: It will be calculated as the preceding financial year’s sales plus 15%. Thus, the 15% escalation is used to establish the moving baseline rather than constituting a standalone 15% growth requirement. Given that the Indian smartphone market delivered only ~1.8% volume CAGR and ~14% value CAGR during CY2022-25, driven largely by premiumisation rather than unit growth, sustaining growth above the scheme hurdle through domestic demand alone may become increasingly difficult. (MeitY PIB, 2026)
Incentives will then be paid on sales above this baseline, subject to the annual threshold being met. The thresholds are calculated on a brand-wise basis, and the sales counted towards them can include exports.
Building Indian Brands (Track 2)
One of the more ambitious and consequential aims of the new scheme is to incentivise the creation of an Indian owned smartphone brand, a signal that India’s vision is moving beyond just attracting factories and boosting assembly. To qualify as an Indian brand, a company must be incorporated in India, its trademark and intellectual property must be held in India, Indian citizens must exercise management control and hold more than 51% of the entity, and it must have in-house design and R&D capabilities in the country. (MeitY, 2026)
Products designed and developed in India can receive an additional 3% incentive on eligible sales for Indian Design and R&D of the product, alongside a domestic sourcing incentive of up to 1.5%. Companies can also opt for a 1 year gestation period, and the scheme leaves room for additional non-fiscal government support. The component-linked incentives range from 0.2% to 0.5% and cover locally made items such as display modules, camera modules, enclosures, batteries, Universal Serial Bus (USB) cables, and connectors. (MeitY, 2026)
Strategic Importance Beyond Manufacturing
Both schemes extend beyond industrial policy and have significant geopolitical implications. Electronics and semiconductors have increasingly become strategic technologies, with their global supply chains concentrated in a few countries and being unstable making diversification, self-reliance, and domestic prowess a priority for the country.
By simultaneously expanding mobile manufacturing and semiconductor capabilities, India is positioning itself not only as an assembly hub, popular largely due to its demand but as a trusted alternative manufacturing destination, while reducing shocks from external vulnerabilities. Read in the context of global hardware geopolitics, this coordination matters: electronics and semiconductor supply chains are increasingly treated as strategic chokepoints rather than ordinary trade goods(ET,2026)
Empirical Performance: Dixon Case Study
Dixon Technologies’ revenue increased from approximately ₹600 crore before the PLI period to more than ₹30,000 crore subsequently and margins on that base improved from 2-2.5% to nearly 3.5% last year. Margins are expected to briefly dip to around 3% in fiscal 2027 as the older incentive structure phases out, before a newer component scheme, called ECMS, begins contributing from the second half of the financial year.(CNBC-TV18,2026)
While the expansion coincided with the PLI period, the company’s growth also reflects broader increases in electronics manufacturing and outsourcing(CNBC-TV18,2026)
Vaishnaw has noted that India has already crossed the 25–28% domestic value-addition range, while the highest value addition built by mature manufacturing economies over decades is generally around 38–40%. He has said three potential Indian players were working towards products that could arrive in about 10–14 months.(Financial Express,2026)
Table 1: PLI-LSEM Outcomes vs. MPMS Targets
| Performance Indicator | PLI-LSEM (2020-26) | MPMS Target (2026-31) |
| Cumulative production value | ~₹20 lakh crore | ~₹39 lakh crore |
| Cumulative exports | ~₹7.5 lakh crore | ~₹15 lakh crore |
| Domestic value addition | ~15% → ~25-28% | 35-40%(projected) |
| Direct employment generated | Not separately disclosed | ~60,000 (projected) |
| Outlay | ~₹40,995 crore (LSEM) | ₹62,500 crore |
Source: Compiled by author from S.S. Rana & Co. (2026), Economic Times Government (2026), and Government of India PIB disclosures
The MPMS is not asking for incremental improvement; it is targeting a near-doubling of production and exports,alongside a substantial increase in domestic value addition, within a single five-year cycle. That is a materially steeper trajectory than PLI-LSEM achieved, which itself took six years to move value addition from roughly 15% to 25-28%. The scale of ambition here is precisely why the design details examined below carry real consequence.(CNBC-TV18,2026)
Two Unresolved Tensions
The shift in philosophy is sound. Whether it works depends on details the scheme has not yet settled.
A growth assumption that may not hold
The 15% moving baseline assumes brands can sustain strong year-on-year growth in eligible sales. But the Indian smartphone market delivered only ~1.8% volume CAGR and ~14% value CAGR between CY2022-25, growth driven largely by premiumisation rather than more units sold (Kotak Institutional Equities, cited in Financial Express, 2026). Domestic volumes grow, firms will have to export increasingly just to qualify for incentives designed to reward domestic manufacturing health – something this scheme does not recognise or guard against.
An R&D incentive smaller than the gap it must close
The marginal 3% design R&D incentive is a large and welcome signal –but small in absolute terms. Achieving a 10-15 percentage point increase in value-addition, something that required decades for established economies, in the span of this five-year scheme cycle is exceptionally demanding. Linked less substantively to Semiconductor 2.0’s design and talent pushes, the separate R&D track could end up being meaningful only for already-scaling firms like Dixon instead of nurturing a domestic design ecosystem at large.
Way Forward
MeitY should release guidelines on verification and audit mechanisms for the criteria under “Indian brand” category prior to commencement of disbursements in FY27 so claims on ownership & R&D are validated against documentary evidence and not just self-declaration(ABC Live,2026). The empowered committee for MPMS should create an export-linked buffer within the moving baseline formula, so firms do not get punished if domestic volumes grow slower than expected in a market that is shifting towards premiumisation over unit growth.(Financial Express,2026).MeitY and the Semiconductor mission should work towards aligning MPMS with Semicon 2.0 goals via common design and testing infrastructure, so incentives at the component level actually grow into a supplier base instead of running two loosely connected programmes.(Economic Times Government,2026).
An independent mid-term review, ideally by NITI Aayog or an external evaluator, should be commissioned by FY28 to assess whether the 25% component-localisation threshold and brand criteria are producing genuine IP ownership, rather than relabelled contract manufacturing. Alongside this, the component-sourcing threshold itself should escalate progressively over the scheme’s tenure for instance, rising from 25% to 40% by FY30-31 to keep pace with the scheme’s own value-addition ambitions.
Conclusion
Three tests should determine whether MPMS delivers the shift from assembly-led growth to genuine domestic capability
First, MeitY should specify clear verification and audit norms for the “Indian Brand” criterion before the first FY2026-27 disbursements. Requirements relating to Indian ownership, management control, domestic IP ownership, and in-house R&D should be supported by documentary evidence and subject to periodic verification, rather than relying primarily on declarations by applicants.
Second, the Empowered Committee should examine whether the scheme’s moving-baseline mechanism remains compatible with the structure of India’s smartphone market. With domestic smartphone volumes growing slowly while value growth is increasingly driven by premiumisation, manufacturers may need to rely increasingly on exports to generate sufficient eligible sales. so that manufacturers are not penalised when domestic volumes underperform despite continued growth in India’s manufacturing and export base.
Third, the 3% design and R&D incentive should be evaluated against the much larger technological gap MPMS seeks to close. MeitY and the India Semiconductor Mission should explore stronger institutional linkages between MPMS and Semicon 2.0, including shared design, testing and prototyping facilities. This would help ensure that incentives for mobile-phone manufacturing and semiconductor development reinforce one another rather than operating as two loosely integrated programmes.
References
ABC Live. (2026, July 16). Critical analysis of India’s Mobile Phone Manufacturing Scheme.
https://abclive.in/2026/07/16/india-mobile-phone-manufacturing-scheme-mpms-2026
Financial Express. (2026,August 23) Rs 62,500 crore to Rs 39 lakh crore: The roadmap of India’s new mobile manufacturing scheme
CNBC-TV18. (2026, September 4). Dixon Technologies remains IIFL’s top EMS pick as mobile manufacturing scheme rolls out.
CSIS. (2022, 11 October). Choking off China’s Access to the Future of AI. Center for Strategic and International Studies.
https://www.csis.org/analysis/choking-chinas-access-future-ai
Economic Times Government. (2026, July 16). India’s ₹1.9 lakh crore electronics strategy: MPMS and Semicon 2.0 explained.
Financial Express. (2026, August 27). What’s the real key to unlock India’s ₹62,500 crore mobile manufacturing incentives?
Government of India, Ministry of Electronics and Information Technology. (2026, July 15). Press release on the Mobile Phone Manufacturing Scheme (MPMS). Press Information Bureau
https://www.pib.gov.in/PressReleasePage.aspx?PRID=2284789®=48&lang=1
S.S. Rana & Co. (2026, August 13). Mobile Phone Manufacturing Scheme (MPMS): India’s next leap in electronics manufacturing
Business Standard (2025, January 9). Weak demand leaves half of India’s mobile manufacturing facilities idle
News18. (2024, November 27). Indian mobile industry sees big growth: 99.2% of phones sold are ‘made in India
PIB(2026, August 27).Government Notifies ₹62,500 Cr Mobile Phone Manufacturing Scheme to Boost Global Competitiveness and Deepen Domestic Value Addition
https://www.pib.gov.in/PressReleasePage.aspx?PRID=2302098&lang=1®=48&utm_source
About the Author
Siddhant Koul is a Research and Editorial Intern at IMPRI. He is a second-year B.A. (Hons.) Political Science student at Ramjas College, University of Delhi. An avid reader and close follower of global affairs and public intellectuals like Pratap Bhanu Mehta, he researches India’s energy security and geopolitical risk — having published a data-driven two-part series on India’s energy crisis drawing on Parliamentary records, PPAC data, and IEA market reports.
Acknowledgements
I would like to express my sincere gratitude to the IMPRI Impact and Policy Research Institute for providing the platform to research and write this policy update article. Special thanks to the editorial board, mentors, and coordinators for their valuable feedback and constructive guidance throughout the drafting process
Reviewed by: Pragya Raghav, Gargi Bisht
Disclaimer
All views expressed in the article belong solely to the author and not necessarily to the organisation.
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