How India’s new Rs 62,500-crore smartphone manufacturing scheme will work

The second sets aside a separate incentive structure for Indian smartphone brands, offering higher support for companies that not only manufacture in the country but also keep their intellectual property, management control, design and research and development capabilities in India. It marks an effort to move beyond India being primarily a manufacturing base for global brands, towards building a domestic handset company with its own technology and brand.

Keeping the PLI engine running

The first component is the direct successor to the smartphone PLI and is aimed at companies manufacturing at scale, including EMS companies.

To qualify, a manufacturer must have recorded at least Rs 10,000 crore in turnover in FY 2025-26. For existing brands, sales must increase by at least Rs 5,000 crore over FY26 levels in the first year, with the threshold rising cumulatively to Rs 10,000 crore in FY28, Rs 15,000 crore in FY29, Rs 20,000 crore in FY30 and Rs 25,000 crore in FY31.

Unlike the original PLI, the baseline itself will also move every year: it will be calculated as the preceding financial year’s sales plus 15%. Incentives will then be paid on sales above this baseline, subject to the annual threshold being met. The thresholds are calculated on a brand-wise basis, and the sales counted towards them can include exports.  

Source – Counterpoint Research

“The new mobile phone manufacturing scheme builds on the central premise of PLI for smartphone makers: India will support manufacturers that can demonstrate scale and meaningful incremental production. Incumbents that have already built manufacturing capacity in India are therefore naturally positioned to benefit,” Dhruv Shekhar, lead of manufacturing and supply chains at the Delhi-based consultancy firm Koan Advisory Group, told The Indian Express. 

The initial PLI helped deepen manufacturing by marquee global brands such as Apple and Samsung in India. But with Chinese brands such as Vivo, Oppo and Xiaomi dominating India’s domestic market, a key question is how widely the government intends to open this track beyond the companies that were beneficiaries of the earlier PLI scheme. 

“Chinese brands have a significant share of the Indian market and increasingly operate through deeper commercial linkages with Indian EMS players. That creates a policy tension for the government: how does it capture the manufacturing and investment benefits of these relationships without allowing the scheme to become a backdoor for extending Chinese control over the value chain? If these partnerships can demonstrate genuine investment, localisation and value addition in India, bringing such players into the scheme could help diversify the manufacturing base beyond the incumbents that drove the first PLI,” Shekhar said.  

The quest for India’s own Apple, Samsung, Vivo

One of the more consequential aims of the new scheme is to incentivise the creation of a homegrown smartphone brand, a clear signal that the government’s ambition for the electronics sector is moving beyond simply attracting factories and boosting assembly.

The push to build an Indian smartphone brand is rooted in a larger gap in India’s electronics story. The country has succeeded in attracting global companies to manufacture mobile phones at scale, but much of the value generated by the industry, from product design and intellectual property to branding and technology, continues to be owned by companies headquartered elsewhere, though Indian companies like Tata Electronics and Dixon are establishing themselves in the contract manufacturing sector.

The new scheme seeks to close that gap by explicitly backing an Indian-owned smartphone brand.

To qualify as an Indian brand under the scheme, a company must be incorporated in India; its trademark and intellectual property must be held in India; Indian citizens must exercise management control and hold more than 51% of the entity; and it must have in-house design and R&D capabilities in the country. IT Minister Ashwini Vaishnaw Friday said the government was in conversation with three Indian firms to design a globally competitive phone at different price brackets. 

“The more interesting shift in the new scheme is that the government is no longer looking only at how many phones India can manufacture, but at who actually owns and develops the product… The Indian-brand track is an attempt to address that gap and, in some ways, rebuild the kind of domestic product capability that India had before foreign brands came to dominate the market,” Shekhar said. 

As per the scheme details, eligible Indian brands will receive a 5% incentive on incremental sales. Products designed and developed in India can receive an additional 3% for design and R&D, apart from the domestic-sourcing incentive of up to 1.5 per cent. Companies can also opt for a one-year gestation period, and the scheme leaves room for additional non-fiscal government support, which will be determined by a separate empowered committee. 

The higher incentive structure is intended to offset some of the cost disadvantage a new Indian entrant would initially face against established global brands

“The real measure of success will not be another headline number for phones produced in India. It will be whether these incentives create Indian brands with real IP, design and product ownership, rather than merely expanding domestic manufacturing or commercialisation of technologies developed elsewhere,” Shekhar said.