NEW DELHI — The Indian government has approved a new Mobile Phone Manufacturing Scheme (MPMS), a policy initiative designed to accelerate domestic production of smartphones and reduce the country’s reliance on imported components. The Cabinet, led by Prime Minister Narendra Modi, cleared the scheme on Wednesday, marking a significant step in India’s push toward self-reliance in electronics manufacturing.
The MPMS aims to provide financial incentives to companies that establish or expand mobile phone production facilities in India. While the government has not yet disclosed specific details of the incentives, the policy is expected to build on the success of the existing Production-Linked Incentive (PLI) scheme, which has already attracted billions of dollars in investments from global and domestic manufacturers.
India has rapidly emerged as a key player in global smartphone assembly, hosting production units for major brands such as Apple, Samsung, and Xiaomi. However, despite this growth, the country remains heavily dependent on imports for high-value components like semiconductors, display panels, and advanced chipsets. This reliance limits the economic benefits of local assembly and exposes the sector to global supply chain disruptions.
What Happened
The Union Cabinet approved the MPMS during a meeting chaired by Prime Minister Narendra Modi. The scheme is part of the government’s broader strategy to deepen India’s integration into the global electronics manufacturing ecosystem. While the official announcement did not provide granular details, it framed the policy as a critical step toward reducing import dependence and creating a more resilient domestic supply chain.
The MPMS is expected to complement the Production-Linked Incentive (PLI) scheme for large-scale electronics manufacturing, which was launched in 2020. Under the PLI scheme, companies receive cash subsidies based on their incremental production, with the mobile phone segment being one of the most successful beneficiaries. Since its inception, the PLI scheme has attracted investments worth over ₹4.78 lakh crore (approximately $57 billion) and generated more than 700,000 direct jobs, according to government data.
The new scheme is likely to target both final assembly and the production of high-value components, though the exact eligibility criteria, incentive structures, and timelines remain undisclosed. Industry stakeholders have expressed cautious optimism, pending further clarity on the scheme’s operational framework.
Why It Matters
The approval of the MPMS comes at a time of heightened geopolitical and economic uncertainty. Global supply chains, particularly in electronics, have faced significant disruptions due to the COVID-19 pandemic, trade tensions between the U.S. and China, and regional conflicts. These challenges have prompted countries like India, Vietnam, and Mexico to position themselves as alternative manufacturing hubs to reduce dependence on China.
For India, the scheme represents an opportunity to strengthen its position in the global electronics value chain. The country is already the world’s second-largest smartphone market by volume, with over 1.2 billion mobile phone users. However, domestic manufacturing has largely been limited to assembly operations, with most high-value components sourced from China, Taiwan, South Korea, and other countries. In 2023, India imported $15.6 billion worth of electronic components, a 12% increase from the previous year, according to data from the Ministry of Commerce and Industry.
The MPMS could help address this imbalance by incentivizing the production of components such as printed circuit boards (PCBs), memory chips, and display modules. If successful, the scheme could reduce import bills, create high-skilled jobs, and enhance India’s technological capabilities. It could also align with the government’s National Policy on Electronics (NPE) 2019, which aims to position India as a global hub for electronics system design and manufacturing (ESDM).
Background and Context
India’s push to boost domestic electronics manufacturing is not new. The government has introduced several policies over the past decade to attract investments and reduce import dependence. The Modified Special Incentive Package Scheme (M-SIPS), launched in 2012, offered capital subsidies and tax benefits to electronics manufacturers. However, the scheme had limited success due to bureaucratic hurdles and a lack of clarity on incentives.
The introduction of the Production-Linked Incentive (PLI) scheme in 2020 marked a turning point. Unlike M-SIPS, the PLI scheme offered direct cash subsidies based on incremental production, making it more attractive to manufacturers. The scheme initially targeted 10 sectors, including mobile phones, pharmaceuticals, and automobiles. The mobile phone segment, in particular, saw rapid growth, with companies like Apple shifting a portion of their production from China to India.
As of 2026, India is home to over 200 mobile phone manufacturing units, producing more than 300 million smartphones annually, according to the India Cellular and Electronics Association (ICEA). However, the value addition in these units remains low, with most high-tech components still imported. For instance, India’s domestic value addition in smartphones is estimated at just 15-20%, compared to 40-50% in China, according to a report by the National Institute of Transforming India (NITI Aayog).
The MPMS is expected to address this gap by encouraging the production of components that currently dominate India’s import bill. The government has also been working on other initiatives, such as the Semiconductor Mission, which aims to establish a domestic semiconductor manufacturing ecosystem. However, progress in this area has been slow due to the high capital costs and technical complexities involved.
Competing Claims and Uncertainty
While the government has framed the MPMS as a game-changer for India’s electronics manufacturing sector, industry experts and analysts have raised several questions about its potential impact.
1. Scope of Incentives: The government has not yet disclosed the specific financial incentives under the MPMS. Industry stakeholders are awaiting details on whether the scheme will focus solely on final assembly or also include high-value components. Without clarity on these aspects, companies may hesitate to commit to long-term investments.
2. Infrastructure and Logistics: India’s manufacturing ecosystem still faces challenges related to infrastructure, logistics, and power supply. While states like Uttar Pradesh, Tamil Nadu, and Karnataka have emerged as key manufacturing hubs, others lag in terms of connectivity and industrial infrastructure. The success of the MPMS may depend on the government’s ability to address these gaps.
3. Competition from Established Hubs: Countries like China, Vietnam, and Mexico have well-established electronics manufacturing ecosystems, with mature supply chains and skilled workforces. India will need to offer competitive incentives and improve its ease of doing business to attract investments away from these hubs.
4. Regulatory Hurdles: Despite improvements in India’s business environment, companies often face regulatory delays and bureaucratic red tape. The government will need to ensure that the MPMS is implemented smoothly to avoid discouraging potential investors.
5. Global Economic Conditions: The global electronics market is currently facing headwinds due to slowing demand in key markets like China and Europe. If demand does not recover, companies may be reluctant to expand production capacities, limiting the impact of the MPMS.
What to Watch Next
The success of the MPMS will depend on several factors in the coming months:
1. Release of Scheme Details: The government is expected to release the full text of the MPMS in the coming weeks. Industry stakeholders will be closely watching for details on eligibility criteria, incentive structures, and timelines. Clarity on these aspects will determine whether companies decide to invest in expanding their production capacities in India.
2. Investment Commitments: Major players like Apple, Samsung, and Xiaomi have already established a presence in India under the PLI scheme. The MPMS could encourage these companies to deepen their investments, particularly in component manufacturing. Watch for announcements from these firms on new production facilities or expansions.
3. Progress on Semiconductor Manufacturing: The MPMS is likely to be closely linked to India’s broader efforts to develop a domestic semiconductor ecosystem. The government’s Semiconductor Mission, which aims to establish fabrication plants (fabs) in India, could complement the MPMS by reducing dependence on imported chips. Progress on this front will be critical to achieving true self-reliance in electronics manufacturing.
4. State-Level Initiatives: Several Indian states, including Tamil Nadu, Uttar Pradesh, and Karnataka, have introduced their own incentives to attract electronics manufacturers. The central government’s MPMS will need to align with these state-level policies to create a cohesive national strategy.
5. Global Supply Chain Shifts: The MPMS comes at a time when companies are increasingly looking to diversify their supply chains away from China. If India can position itself as a reliable alternative, it could attract more investments. However, this will depend on the country’s ability to address infrastructure and regulatory challenges.
6. Job Creation and Skill Development: The electronics manufacturing sector has the potential to create millions of jobs, both directly and indirectly. The success of the MPMS will be measured not just in terms of investment and production, but also in its ability to generate high-skilled employment opportunities.
Conclusion
The approval of the Mobile Phone Manufacturing Scheme (MPMS) marks a significant step in India’s efforts to reduce import dependence and strengthen its position in the global electronics supply chain. While the scheme has the potential to attract investments and create jobs, its success will hinge on the government’s ability to address key challenges, including infrastructure gaps, regulatory hurdles, and competition from established manufacturing hubs.
The MPMS aligns with India’s broader vision of achieving self-reliance in critical sectors, but its impact will depend on the details of the incentives and the government’s ability to implement the scheme effectively. As the world grapples with supply chain disruptions and geopolitical tensions, India’s push to deepen its manufacturing capabilities could position it as a key player in the global electronics market. However, the road ahead is fraught with challenges, and the coming months will be critical in determining whether the MPMS can deliver on its promises.
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