Why in News?

• The Government has notified the ₹62,500-crore Mobile Phone Manufacturing Scheme (MPMS) for five years from FY 2026-27 to FY 2030-31.
• It succeeds the Production Linked Incentive (PLI) Scheme for Large Scale Electronics Manufacturing (PLI-LSEM), whose tenure ended on March 31, 2026.
• The new scheme seeks to move India beyond large-scale assembly towards higher domestic value addition (DVA), indigenous design and R&D, stronger component supply chains and globally competitive Indian brands.

What’s in Today’s Article?

• Need for the New Scheme
• Two-Pronged Architecture
• Incentive Structure
• The Larger Economic Significance
• Key Structural Challenges
• Way Forward

Need for the New Scheme:

• India has emerged as a major global mobile-phone manufacturing hub, but much of the value captured in the sector remains concentrated in assembly and foreign-owned brands. The MPMS therefore attempts to address the “assembly versus value creation” gap by incentivising both manufacturing scale and ownership of technology, intellectual property and brands.
• The earlier PLI-LSEM helped establish India as a major manufacturing and export base.
• The next challenge is to deepen the ecosystem so that more components, design capabilities, patents and economic value are generated domestically. 

Two-Pronged Architecture:

• Scale-up of mobile manufacturing:
  • The first component targets mobile-phone manufacturers and Electronics Manufacturing Services (EMS) companies.
    • Applicant companies must be incorporated in India and have recorded at least ₹10,000 crore turnover in FY 2025-26.
    • Existing brands must achieve incremental sales over a progressively rising threshold - ₹5,000 crore in FY27, rising annually to ₹25,000 crore in FY31.
    • For a new brand, eligibility begins after achieving ₹10,000 crore annual sales, followed by year-on-year incremental sales requirements.
    • A moving baseline is used - baseline sales are the previous year's domestic sales plus 15%. Incentives are calculated on sales exceeding this baseline.
  • This design attempts to reward genuine incremental production rather than merely subsidising existing output.
• Building Indian-owned mobile brands:
  • The second component represents the more strategic shift.
  • The Government wants India not merely to manufacture smartphones for global companies but to develop Indian-owned brands comparable with leading international players.
  • To qualify as an Indian brand, the company must meet conditions relating to -
    • Incorporation in India;
    • Indian ownership of trademark and intellectual property;
    • Management control by Indian citizens;
    • More than 51% Indian ownership/control; and
    • In-house design and R&D capabilities in India.
  • The Government is reportedly working with Indian companies to develop such brands, with the objective of bringing a strong indigenous product to market.

Incentive Structure:

• The scheme provides 2.25%–5% incentives on eligible sales, depending on the category.
• Indian brands receive stronger support -
  • 5% incentive on eligible incremental sales;
  • Up to 1.5% additional incentive for domestic sourcing of key components and sub-assemblies;
  • Additional 3% incentive for Indian design and R&D;
  • A one-year gestation period is available to Indian brands; and
  • Additional non-fiscal support may be provided through an empowered committee.
• Thus, the incentive architecture deliberately links public support with domestic sourcing, innovation and intellectual-property creation, rather than focusing solely on production volumes.

The Larger Economic Significance:

• The scheme reflects a transition in India's electronics strategy: Import substitution → domestic assembly → export-oriented manufacturing → domestic value addition → Indian technology, IP and brands.
• The Government aims to strengthen India's position in Global Value Chains (GVCs) while retaining a larger share of the economic value generated by the electronics sector.
• India is already the world's second-largest mobile-phone manufacturer by volume, while 99.2% of mobile phones used domestically are now made in India.
• Smartphones also became India's largest individual exported product category in 2025.
• The Government estimates that MPMS -
  • Could generate around ₹39 lakh crore of cumulative production and about 60,000 direct jobs,
  • While strengthening technological sovereignty and Indian patents in design and R&D.
• Domestic value addition was around 23% in FY2023-24, highlighting the substantial scope for deeper localisation.

Key Structural Challenges:

• Component ecosystem: India remains dependent on imports for several high-value components and inputs.
• Technology gap: Manufacturing at scale does not automatically translate into ownership of core technologies.
• Global competition: Indian brands must compete with established firms possessing strong R&D, supply chains, consumer loyalty and distribution networks.
• Cost competitiveness: Higher domestic sourcing can initially raise production costs.
• Innovation ecosystem: Sustained investment in R&D, semiconductor technology, design and skilled manpower is essential.
• MSME integration: Benefits should eventually reach smaller domestic component manufacturers rather than remaining concentrated among large firms.

Way Forward:

• MPMS should be integrated with the India Semiconductor Mission, electronics-component ecosystem, skill development, R&D incentives and trade policy.
• Greater support for Indian design houses, startups and component manufacturers can help create an end-to-end electronics ecosystem.
• The real measure of success should therefore be domestic value addition, rather than merely the number of smartphones assembled in India.