Launched as part of the government’s broader vision to promote domestic production capabilities, boost exports and cut imports, the production-linked incentive (PLI) scheme offers incentives based on incremental production in various critical sectors, including electronics, telecom and passive electronic components. These targeted interventions have set the stage for robust industrial growth. While the green shoots of growth are beginning to spring across sectors, several issues still need to be addressed for the industry to realise its full potential. A look at different segments under the PLI scheme…
Large-scale electronics manufacturing
The PLI scheme was introduced in March 2020 for large electronics, with an initial outlay of Rs 409.51 billion, encompassing two major product categories – mobile phones and specified electronic components such as printed circuit boards (PCBs), resistors and capacitors. This was later revised to Rs 386.01 billion.
The scheme has catalysed a major shift in India’s mobile phone production landscape. As of December 2024, cumulative production under the scheme has reached Rs 6.62 trillion, supported by a total investment of Rs 102.13 billion. In 2015, 74 per cent of all mobile phones sold in India were imported; today, 99.2 per cent of mobile handsets used in the country are manufactured domestically. Moreover, mobile phone exports have grown remarkably, rising from Rs 228.68 billion in 2020-21 to Rs 1.29 trillion in 2023-24, reflecting a strong CAGR of 78 per cent.
This surge in domestic mobile phone production has largely been driven by the booming demand for smartphones. With consumers rapidly upgrading to function-rich devices, smartphones have emerged as the most prominent product segment within mobile manufacturing. According to the government’s data, India’s smartphone exports crossed Rs 1.75 trillion in the first 11 months of 2024-25 (April to February), surpassing the full-year target of Rs 1.68 trillion. This marks a 54 per cent year-on-year growth. Major contributors include Apple’s manufacturing ecosystem, Foxconn (Tamil Nadu), Tata Electronics (Karnataka) and Pegatron (Tamil Nadu), which together accounted for around 70 per cent of total exports. Meanwhile, Samsung (Noida) contributed approximately 20 per cent. These players have consistently met PLI targets and qualified for incentive payouts. Moreover, Foxconn and Tata Electronics have recently set up new manufacturing units in Tamil Nadu and Karnataka, respectively, which are expected to boost the domestic production capacity. Foreign direct investment into the electronics sector surged by 254 per cent during the PLI years, further validating the scheme’s role in unlocking global capital.
Telecom and networking products
The telecom PLI scheme was launched in February 2021 with an initial outlay of Rs 121.95 billion, spanning 33 products under four broad categories – core transmission equipment; 4G/5G, next-generation random access network (RAN) and wireless equipment; customer premises equipment, internet of things (IoT) access devices and other wireless equipment; and enterprise equipment.
The scheme has been instrumental in achieving nearly 60 per cent import substitution for telecom products in India. This momentum has prompted several global technology companies to establish manufacturing operations in the country, positioning India as an emerging exporter of 4G and 5G telecom equipment. Recently, Ericsson announced plans to manufacture all its telecom antennas for the Indian market, while Nokia secured a multibillion-dollar deal with Bharti Airtel to supply 4G and 5G network equipment.
As of January 31, 2025, government data indicated that beneficiaries under the scheme have collectively invested Rs 40.81 billion, resulting in total sales of Rs 786.72 billion, including Rs 149.63 billion from exports.
Further, the PLI scheme has undergone amendments to provide greater flexibility. These include an additional 1 per cent incentive for products that are designed, developed and manufactured in India, aimed at promoting design-led manufacturing. Additionally, 11 new products have been added to the list of approved items, and companies now have the option to include more products during the scheme’s duration. Incentive claims can also now be filed quarterly, streamlining the process for participants.
Among the notable beneficiaries, Tejas Networks recently received Rs 1.89 billion for 2024-25, marking a significant boost to its manufacturing capabilities. Meanwhile, companies such as Nokia, Flextronics, VVDN Technologies, Samsung and Dixon Technologies have continued to expand their operations under the scheme.
So far, 42 beneficiaries, including 28 micro, small and medium enterprises (MSMEs), have committed to investments totalling Rs 41.15 billion, with projected sales of Rs 2.45 trillion. Beyond financial gains, the scheme has facilitated vital technology transfers and the indigenous development of core telecom infrastructure. Notably, Bharat Sanchar Nigam Limited’s 4G deployment is based on the Centre for Development of Telematics’ core and RAN equipment from Tejas Networks, while India’s ongoing 5G roll-out is primarily supported by locally manufactured equipment.
Passive electronic components 
To complement the mobile phone PLI scheme and bolster India’s electronics manufacturing ecosystem, the Indian government launched a Rs 229.19 billion PLI scheme for passive electronic components on March 28, 2025. This six-year scheme, with a one-year gestation period, is expected to attract Rs 593.5 billion in investments and support production worth Rs 45.65 billion. It focuses on key segments where India remains import-dependent despite achieving near-complete domestic phone assembly, such as battery cells, display modules, camera modules and printed circuit board (PCB) assemblies. Passive/Non-semiconductor electronic components make up 60 per cent of the cost of finished electronic products, and building self-resilience in this segment could be a major game changer.
To encourage further value addition, the scheme offers tiered incentives for both subassemblies (such as display and camera modules) and bare components (such as multilayer ceramic capacitors, lithium-ion cells and high-density PCBs). It also includes capex grants for essential machinery. Leading companies such as Dixon Technologies, Tata Electronics and Zetwerk have expressed interest in investing under the scheme. Meanwhile, Foxconn’s subsidiary Yuzhan Technology has already begun pilot assembly of display modules in Tamil Nadu, and Tata Electronics is set to commission a large-scale battery-pack factory by mid-2025.
Challenges and shortcomings of the scheme
One of the most pressing issues in the PLI scheme is the inability of many participating firms to meet the prescribed investment and production thresholds. For instance, Lava and Optiemus Electronics, as well as Rising Star (Bharat FIH), a smartphone contract manufacturer for China’s Xiaomi, failed to meet the required criteria and were therefore unable to claim incentives.
Further, while the PLI scheme offers 1 per cent additional incentive for products designed, developed and manufactured in India, the high investment and production thresholds have acted as a deterrent for many smaller manufacturers and new entrants. For instance, MSMEs are required to make a minimum investment of Rs 100 million to qualify for the telecom PLI scheme. This limits their ability to participate in and benefit from the scheme.
India’s import dependence in key areas remains another persistent challenge. While mobile phone assembly is now nearly self-reliant, core components such as high-end semiconductors, chipsets and certain modules still have to be imported. As per industry estimates, about 40 per cent of India’s import of telecom instruments was from China over the past three years. This is because electronics manufacturing in India faces a cumulative cost disability of 10-14 per cent for assembly and 14-18 per cent for component manufacturing compared to China. This includes disabilities due to tariffs and material costs (4-6 per cent), logistics costs (2-3 per cent) and high finance costs, which add about 1-2.5 per cent for assembly and up to 4 per cent for components. China also has an advantage due to the presence of local components and subassembly ecosystems.
Additionally, limitations in the scheme’s design and execution have also been identified. The PLI scheme has set aside only 2.5 per cent of its total outlay towards research and development. This allocation is relatively low, particularly for sectors such as semiconductors, where innovation is essential to building long-term competitiveness. Moreover, delays in the disbursement of incentives have also emerged as a critical bottleneck. As of late 2024, only a fraction of the sanctioned amount had been disbursed across multiple PLI sectors, creating cash flow issues for participating companies and undermining investor confidence.
Conclusion
The evidence is compelling – despite persistent challenges, the scheme’s net impact is qualitatively positive. The PLI scheme has significantly transformed the telecom and electronics manufacturing landscape. It has been instrumental in strengthening the global competitiveness of Indian exporters. Over the past five years, India’s trade deficit in the telecom sector, including both equipment and mobile devices, has significantly narrowed from Rs 680 billion to Rs 40 billion. Moreover, the scheme has attracted global players, built domestic manufacturing capacity and shifted India’s trajectory towards becoming a telecom hardware and mobile phone export hub.
Among its most visible successes is the mobile phone segment, where output and exports have surged, and the tax revenues generated have far exceeded the scheme’s cost. The newly launched PLI scheme for electronic components is still in its early stages, but initial investments from key players suggest strong growth potential. To sustain this momentum, fine-tuning is essential. With smarter tweaks, the scheme can move beyond its role as a manufacturing catalyst to becoming a cornerstone of India’s long-term technological leadership.
Harshita Kalra
