India’s newly notified ₹62,500-crore Mobile Phone Manufacturing Scheme (MPMS), effective from FY 2026-27 to 2030-31, builds on the success of the earlier PLI programme that transformed the country from a net importer into the world’s second-largest mobile-phone manufacturer by volume, with production crossing ₹6 lakh crore, strong export growth, and near-complete domestic assembly.
The new scheme offers tiered incentives of 2.25–5 percent, plus additional rewards of up to 1.5 percent for sourcing key components locally and 3 percent for Indian brands investing in design and R&D, aiming to raise domestic value addition from the current 22–23 percent to 35–40 percent, create tens of thousands of jobs, and generate genuine net foreign-exchange gains by deepening the component ecosystem through parallel schemes such as ECMS and Semicon 2.0, while addressing remaining challenges of cost disabilities, import dependence on high-value parts, and the need for stronger skills, infrastructure, and policy coherence to climb higher in the global value chain.
On 21 August 2026, the Ministry of Electronics and Information Technology notified the ₹62,500-crore Mobile Phone Manufacturing Scheme (MPMS). Running from FY 2026-27 to FY 2030-31, it succeeds the Production Linked Incentive (PLI) scheme for Large Scale Electronics Manufacturing that ended in March 2026. The new programme offers base incentives of 2.25–5 per cent on eligible sales of mobile phones manufactured in India, an additional incentive of up to 1.5 per cent for domestic sourcing of key components and sub-assemblies (display modules, camera modules, enclosures, batteries including cells, and USB cables/connectors), and a further 3 per cent for Indian brands investing in local design and R&D. Indian brands (majority Indian ownership, IP and trademarks held in India) receive a flat 5 per cent incentive without minimum sales thresholds applicable to others. Cumulative production is targeted at approximately ₹39 lakh crore, with substantial export growth and about 60,000 direct jobs.
This is not a simple extension of earlier incentives. It is a deliberate shift from scale-oriented assembly toward deeper domestic value addition, Indian brand building, and technological sovereignty, precisely the ingredients needed for India to consolidate its position as one of the world’s most important mobile-phone producers while capturing a larger share of the global value chain (GVC).
From Net Importer To Second-Largest Producer
A decade ago, India was overwhelmingly dependent on imported finished handsets. Production of mobile phones stood at roughly ₹18,000–19,000 crore in 2014-15; by 2025-26 it had surged to about ₹6.27 lakh crore. Exports rose from a negligible ₹1,500 crore to around ₹2.59–2.60 lakh crore. Smartphones became India’s single largest individual export commodity in FY 2025-26, overtaking petroleum products and gems and jewellery in certain rankings. India is now the world’s second-largest mobile-phone manufacturer by volume, with more than 99 per cent of phones sold domestically made in India, and has shifted from net importer to net exporter of finished handsets.
The first PLI scheme (launched 2020) delivered results well above targets: investment of over ₹20,500 crore against a ₹7,000-crore goal, production of ₹11.61 lakh crore versus ₹8.12 lakh crore targeted, and exports of ₹6.43 lakh crore against ₹4.87 lakh crore. Total ecosystem investment catalysed by the scheme reached approximately ₹96,000 crore. Apple’s contract manufacturers (Foxconn, Tata Electronics and others) and Samsung drove much of the volume and export surge; Apple alone accounted for a dominant share of smartphone exports in recent years.
Scale was the necessary first step. Final assembly is labour-intensive and generates large numbers of jobs—particularly for young women in states such as Tamil Nadu, Karnataka and Uttar Pradesh. Direct employment in organised mobile-phone manufacturing rose dramatically (from tens of thousands to well over 2.5 lakh in some estimates by the early 2020s), with total direct-plus-indirect jobs in the broader ecosystem reaching several hundred thousand to over a million when logistics, packaging and supplier activities are included. The new MPMS is projected to add another 60,000 direct jobs while sustaining and expanding the existing base.
Moving Beyond Assembly: Rising Domestic Value Addition
Critics have long noted that assembly captures only a thin slice of a smartphone’s value—often under 10 per cent for high-end devices—while semiconductors, displays, camera modules, batteries and precision components account for the bulk. Domestic value addition (DVA) in Indian smartphones rose from roughly 5–15 per cent in the late 2010s to about 22–23 per cent by 2025-26. The government’s explicit target under the new architecture is 35–40 per cent.
This progression is already visible. Indian plants now manufacture battery packs, camera modules, display modules, mechanicals, PCB assemblies and several sophisticated sub-assemblies that were largely imported a few years earlier. Indirect domestic value added—value created by upstream suppliers of components, materials and services—has grown even faster than direct factory value addition, indicating deepening backward linkages. Research using the Annual Survey of Industries and input-output frameworks shows total DVA (direct plus indirect) rising several-fold, with its share in gross output climbing from around 9 per cent to over 22 per cent in the post-PLI period. Export-linked DVA has expanded particularly sharply.
The MPMS explicitly rewards this shift. The additional 1.5 per cent incentive is available only when a firm sources specified key components domestically for at least 25 per cent of the units it manufactures in a financial year. Individual component rates (0.2–0.5 per cent) create granular incentives for localisation of high-value items. Parallel schemes reinforce the effort: the Electronics Component Manufacturing Scheme (ECMS), with outlay raised to ₹40,000 crore, has already approved projects with investment commitments of nearly ₹70,000 crore across more than 100 applications covering camera and display modules, copper-clad laminates, connectors, capacitors, filters, speakers, anode materials and capital equipment. Semicon 2.0 (₹1.27 lakh crore outlay) targets processors, memory and other chips. Together, these programmes aim to close the component gap, which still sees a large share of bill-of-materials value flowing overseas.
Indian brands receive preferential treatment—flat 5 percent base incentive plus the domestic-sourcing bonus plus an extra 3 percent for design and R&D—precisely to foster intellectual-property creation, local product architecture and eventual global brand presence. This is the pathway from contract manufacturing to capturing design, branding, and software margins at the top of the GVC.
Employment, Exports And Genuine Forex Contribution
Employment gains are real and regionally significant. Assembly operations absorb large numbers of semi-skilled workers; component and sub-assembly plants demand higher skills and generate denser local supply-chain employment. Female participation has risen noticeably in many clusters. The multiplier effect—each direct job supporting several indirect ones in logistics, packaging, testing and services—amplifies the labour-market impact in a labour-abundant economy.
On the external front, India has moved from a large deficit in finished mobiles to a surplus. Component imports have risen with production scale, yet careful accounting that adjusts for actual component utilisation and the counterfactual of continued finished-phone imports shows a positive and growing adjusted trade balance for the mobile ecosystem since around 2019. In other words, the foreign-exchange outflow on components is more than offset by the savings from not importing finished devices plus the inflow from exports. Smartphone exports have become a meaningful contributor to India’s merchandise export basket and to bilateral trade balances with key markets.
Whether this constitutes a “genuine” export surplus depends on the metric. Gross export numbers are impressive and growing. Net forex gain after accounting for imported inputs is positive and improving as localisation deepens. The fiscal arithmetic of the first PLI was also favourable: incentive outflows were more than matched by tax revenues generated by the expanded activity. The new scheme’s larger outlay will face the same test—sustained production and export growth must continue to generate fiscal returns that exceed the incentive cost.
Fiscal Challenges And Structural Headwinds
Several challenges remain. Domestic value addition, while rising, is still below China’s roughly 40 per cent and even Vietnam’s higher component localisation in some segments. High-value items—advanced semiconductors, certain display technologies, precision sensors continue to be imported. Cost disabilities relative to East Asian competitors (logistics, power reliability, cost of capital, scale economies) persist in the 10–18 per cent range for assembly and components, requiring ongoing policy offsets. Concentration risk is real: a handful of large contract manufacturers and brands account for most volume and exports. Skill shortages at higher technical levels, incomplete testing and certification infrastructure, and the need for deeper MSME integration into global supply chains are ongoing constraints. Geopolitical shifts, tariff changes in destination markets, and competition from other emerging manufacturing hubs could erode India’s current window of opportunity if it does not maintain momentum.
Fiscal sustainability of large incentive programmes requires careful calibration. Overly generous or poorly targeted support can create deadweight losses; under-support risks losing hard-won scale. Monitoring incremental sales baselines, preventing gaming, and ensuring that incentives are progressively linked to genuine localisation and design effort will be essential.
Policy Prescriptions For Climbing The Global Value Chain
To convert assembly success into sustained higher-value participation, several reinforcing actions are required.
First, maintain and refine the incentive architecture so that rewards rise with domestic content, design intensity and export performance, while tapering for pure assembly over time. Align MPMS tightly with ECMS and Semicon India so that component and chip capacity come online in lockstep with handset demand.
Second, accelerate skill development and R&D ecosystems. Expand specialised training programmes for electronics manufacturing, mechatronics and semiconductor processes; strengthen industry–academia collaboration on applied research; and create design centres and testing facilities that reduce the cost and time of local product development.
Third, address cost and logistics disabilities through reliable power, better port and inland connectivity, simplified customs procedures, and competitive capital costs. Rationalise the inverted-duty structure on components where it still hampers competitiveness, while protecting the domestic ecosystem from sudden surges of finished imports.
Fourth, integrate MSMEs more deeply into the supply chain through vendor-development programmes, quality certification support, and access to finance and technology. Cluster development under the modified Electronics Manufacturing Clusters scheme should continue to provide plug-and-play infrastructure.
Fifth, pursue market access aggressively via free-trade agreements and trade diplomacy, while ensuring rules-of-origin provisions protect genuine value addition. Diversify export destinations beyond current concentrations.
Sixth, monitor outcomes rigorously—not only gross production and export figures but DVA shares, employment quality (skill levels, formalisation, gender), patent filings, and net forex contribution. Transparent, data-driven evaluation will allow mid-course corrections.
Seventh, foster Indian brands with patient support for design, marketing and after-sales capabilities so that a larger share of brand and software margins remains in the country.
India has already demonstrated that focused industrial policy can transform a net-import dependence into a major manufacturing and export platform within a decade. The MPMS, backed by component and semiconductor programmes, represents the logical next phase: converting scale into depth, assembly into higher value addition, and contract manufacturing into technological and brand sovereignty. If executed with discipline, the combination of production volume, rising DVA, employment generation and genuine forex contribution can embed mobile electronics as a durable pillar of India’s manufacturing and export economy—positioning the country as a central node in the global mobile-phone value chain rather than merely a low-cost assembly location. The window is open; sustained policy coherence and private-sector investment will determine how far and how fast India climbs.
References
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The Hindu. 2026. “Govt Notifies Mobile Phone Manufacturing Scheme; Extra Incentives for Indian Brands.” August 21, 2026. https://www.thehindu.com/business/govt-notifies-mobile-phone-manufacturing-scheme-extra-incentives-for-indian-brands/article71374233.ece.
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