For years, India had experimented with tariffs, import restrictions and various manufacturing policies, yet remained heavily dependent on imported telecom equipment. Smartphones sold in India were also largely coming from factories outside the country.
When the production-linked incentive (PLI) scheme was introduced for telecom and electronics manufacturing, it took a different approach. Instead of trying to control what companies produced or where they invested, it offered incentives linked to incremental production and sales. This was based on the logic that the more a company manufactured, the more support it could receive. For manufacturers making long-term investment decisions, that kind of clarity mattered.
The approach worked in attracting investment and expanding production. What it did not do was distinguish between products that were largely assembled in India and those that were genuinely built in India. The incentive was tied to the finished product, not to where the components came from, where the technology was developed, or how much value was added locally. Therefore, that seemed like a reasonable trade-off. A few years later, it has become one of the biggest questions surrounding the next phase of the programme.
PLI 1.0
The telecom equipment PLI scheme, launched in February 2021 with an outlay of Rs 121.95 billion, brought 42 companies into the scheme and covered a wide range of telecom and networking products. Running alongside it was the much larger mobile phone PLI scheme, administered by the Ministry of Electronics and Information Technology, which attracted global manufacturers such as Foxconn, Tata Electronics and Pegatron, as well as domestic players like Dixon Technologies and Lava. Together, the two schemes helped put India on the global manufacturing map in a way that would have been difficult to imagine a decade ago.
The improvement in the trade balance is hard to ignore, but it does not tell the whole story. A large part of the export growth came from the assembly of finished products, particularly smartphones, while many of the most valuable components inside those devices continued to be imported. As exports grew, imports of components and subassemblies also rose. That is why the export story and the localisation story are not quite the same thing. India is exporting far more than it did before the PLI scheme, but domestic value addition in electronics manufacturing is still estimated at only 18-20 per cent.
Even so, the scheme delivered on several of its core objectives. According to data by the Department of Telecommunications (DoT), the telecom equipment PLI scheme helped achieve around 60 per cent import substitution in telecom products, while India became nearly self-reliant in areas such as antennas, gigabit passive optical network equipment and customer premises equipment. The Bharat Sanchar Nigam Limited 4G roll-out, built around technology developed by the Centre for Development of Telematics, Tata Consultancy Services and Tejas Networks, also showed that an Indian telecom stack could be deployed at a national scale. More importantly, it provided a real-world example that domestic telecom technology can move beyond the pilot stage and operate on a large commercial network.
The impact was equally visible in mobile manufacturing. Production rose from 58 million units in FY 2014-15 to 330 million units in FY 2024, while mobile phone imports fell from Rs 486.09 billion to Rs 76.65 billion. Further, India emerged as a major smartphone export base, with Apple increasingly using the country as a manufacturing and export hub. The result was a sharp increase in production, exports and investment. However, what remained unfinished was increasing the share of components and technology that are actually made in India.
Gaps in PLI 1.0
One area where the schemes fell short was domestic value addition. This was not because companies failed to meet expectations; they responded to the incentives that were on offer. The schemes rewarded production and sales, not the proportion of local content within a product. As a result, a smartphone assembled in India using imported chipsets, displays and camera modules could qualify for the same incentive as one with a much higher share of locally sourced components. Exports grew quickly, but localisation moved at a slower pace.
Participation was uneven as well. As of January 2026, only 23 of the 42 approved telecom equipment beneficiaries had received incentives under the scheme. Some companies were able to scale production and meet the required thresholds, while others were not. The telecom PLI scheme also set aside Rs 10 billion for micro, small and medium enterprises, yet the list of incentive recipients remained dominated by larger manufacturers.
PLI 2.0
The proposed successor to the mobile phone PLI scheme, widely referred to as Mobile PLI 2.0, is expected to have an outlay of around Rs 460 billion. That would make it slightly larger than the original Rs 409.95 billion scheme. The ambition is equally large. Industry estimates suggest that India could significantly increase mobile phone exports over the next few years, while the India Cellular and Electronics Association proposed raising the country’s share of global mobile phone production from around 15 per cent today to 30-35 per cent by FY 2031.
What makes this phase different is that the debate would not just be about production. This time, the focus is increasingly moving towards localisation and the development of a stronger component ecosystem. The concern is that export growth alone will not substantially increase domestic value addition if most of the components continue to be imported.
Whether those priorities remain intact in the final scheme design is still unclear. Industry groups have argued that stricter localisation requirements could make implementation more complicated and reduce the scheme’s appeal to manufacturers. Policymakers therefore face a balancing act. The next phase needs to encourage deeper localisation without making the programme so restrictive that it slows investment. How that balance is struck could determine whether PLI 2.0 delivers something fundamentally different from the first phase, or simply a larger version of it.
The road ahead
PLI 2.0 is entering a very different world from the one that existed when the first scheme was launched in 2020. Global manufacturers are looking for alternatives to concentrated supply chains, and India has benefited from that shift. Smartphone production is the clearest example. Companies that once relied heavily on China are increasingly using India as part of their global manufacturing and export strategy, particularly for the US market. The opportunity is significant, but it should not be taken for granted. Trade policies change, tariffs change and supply chains adapt. The countries that benefit in the long run are usually the ones that build capabilities rather than simply attract assembly lines.
The telecom equipment side faces a different challenge. Operators are still expanding 5G networks, industry interest in open radio access network (RAN) continues to grow, and work on future 6G technologies is already under way. Companies that invested under the first phase of the scheme will eventually need greater clarity on what comes next. Any future telecom manufacturing programme will also need to reflect how the industry is evolving, including areas such as open RAN and satellite communications.
India is entering this phase from a much stronger position than it did a decade ago. Electronics production crossed Rs 11.3 trillion in FY 2025, and the country has emerged as one of the world’s largest smartphone manufacturing hubs. The first phase of the PLI scheme helped scale production, attract investment and turn India into a major export base. The challenge now is different. The focus is shifting from assembling more devices to increasing the share of components that are made locally. Whether Mobile PLI 2.0 succeeds will depend on its ability to deepen localisation and strengthen the domestic electronics supply chain.
Harshita Kalra
