A 3% incentive on sales of mobile phones designed, patented, built and sold in India carries high expectations, with the Centre hoping it will encourage private firms to invest in research and development rather than remain focused on low-value assembly.
The additional incentive that a local mobile phone brand can earn from the Centre over the next five years can allow electronics manufacturers to invest in aspects beyond manufacturing, which in turn would be key to creating a mobile phone brand in the country, S. Krishnan, secretary at the ministry of electronics and IT (Meity), told Mint in an interview.
"The ‘made in India’ brand incentives are where we will try to push companies to invest in research or increase their margins. India’s electronics ecosystem needs the capacity to do multiple things at the same time—design, manufacture, and market. All of this also needs to happen competitively, and the incentive to create an Indian mobile phone brand will address that,” the top bureaucrat said.
New incentive programme
On 15 July, New Delhi announced a ₹62,500 crore outlay under the Mobile Phone Manufacturing Scheme (MPMS), with incentives of 2.25% to 5% for local manufacturing. To shore up margins of local electronics manufacturers and make them invest in localization of components, Meity will also offer an additional 1.5% on top of the base incentive to source key components locally, and a further 3% if the company also promotes an indigenous brand in the country.
All incentives will be calculated on total sales of mobile phones within the country, which means that if a phone manufacturer creates its own brand of devices, earn an additional 9.5% of its turnover as incentives from the government, adding significantly to its profitability. To be sure, Dixon Technologies, India's top listed electronics manufacturer, reported 3.4% operating margin in FY26.
This, Krishnan said, is designed to ensure that Indian electronics brands don’t just remain low-margin manufacturers but also climb the value chain. “Even though the market is more mature and saturated than before, we do have to begin somewhere. Look at what China did and the way it leveraged its electronics ecosystem—all the brands that are familiar names today did not even exist just over a decade ago.”
Meity’s first tranche of smartphone incentives, called production-linked incentives for large scale electronics manufacturing (PLI for LSEM) offered an initial outlay of ₹38,645 crore, with incentives of 4-6% on total turnover without a localization clause.
While the scheme helped companies such as Tata Electronics and Dixon Technologies scale up and generate nearly ₹50,000 crore or more in annual revenue, the manufacturers have continued to remain low-margin assemblers, without their own product design patents or brands.
“The first PLI had a structure that wasn’t really working,” Krishnan said. “If you look at Foxconn, they had one branch of operations making devices for Apple in India, and another for all other brands under its Bharat FIH Ltd subsidiary. But, Bharat FIH practically stopped making phones in the country as Indian manufacturers scaled and brands diversified operations.”
“Such things became loopholes that could have been misused, which is why this time, we’ve made a clear distinction—when we’re talking about incentivizing electronics companies in India, we mean an Indian ‘brand’, and not just a manufacturer operating here,” he added.
The ₹2.29-trillion package
The ₹62,500-crore MPMS scheme will work alongside Meity’s ₹1.27 trillion Semicon 2.0 scheme for making processors, memory, storage and other chips locally, and a third ₹40,000-crore electronics components manufacturing scheme (ECMS), notified on 8 April 2025, to incentivize local manufacturing of printed circuit boards (PCBs), display and camera modules for mobile phones, and other sub-assemblies of components.
The ₹2.29-trillion ($24 billion) outlay over five years seeks to bring back homegrown mobile brands akin to Micromax, Lava and Karbonn, which lost market share—or exited the market altogether—after Chinese rivals entered the Indian market about 15 years ago with aggressively priced devices.
Industry stakeholders, on this note, said that the MPMS is a well-rounded offering, if India’s electronics makers can implement the scheme well.
Ajai Chowdhry, co-founder of HCL and founder of industry body Epic Foundation, said that while the finer details of the scheme are yet to be unveiled, “the government is clearly thinking in the right direction to give a well-rounded boost to the entire ecosystem”.
“This will bring business to local component makers, as well as help electronics firms invest the additional margin to create domestic patents, which is what will unlock the true value generation potential of the Indian market. Simply assembling devices is just not good enough any longer,” Chowdhry added.