India’s Smartphone

India’s emergence as a global manufacturing hub, particularly in electronics, reflects a strategic shift from IT services to manufacturing. The Production-Linked Incentive (PLI) Scheme for smartphones (2020) has played a pivotal role by boosting production, exports, and employment, while enabling integration into global value chains (GVCs).

Performance Outcomes of the Smartphone PLI

The scheme has led to a significant surge in production and investment, with output rising from $30 billion (2020) to $64 billion (FY2025), highlighting strong multiplier effects. At the same time, exports increased sharply from $3.1 billion to $24 billion, raising India’s share in global smartphone exports from 1% to ~8%, which reflects deeper global integration.

In terms of employment, the PLI has generated around 1.5–2 lakh jobs, both direct and indirect. The expansion of global supply chains, especially those linked to major firms, has further strengthened job creation. Additionally, forward linkages have improved through the Electronics Component Manufacturing Scheme (ECMS), aimed at enhancing domestic manufacturing capabilities.

Key Factors Behind the Success

A major reason for success is the strong export orientation of the scheme. Unlike traditional import substitution policies, it prioritised global market integration, enabling scale and competitiveness.

Another key factor is the assembly-led growth strategy, which focused on attracting global manufacturers and followed the “assembly first, ecosystem later” model. This facilitated rapid capacity expansion and development of supplier networks.

The scheme also leveraged India’s labour advantage, as labour-intensive assembly operations generated large-scale employment, including high female workforce participation.

Further, a rational tariff policy reduced duties on key inputs, ensuring lower production costs and avoiding tariff inversion. This was complemented by administrative efficiency, including infrastructure improvements and quick resolution of bottlenecks.

Finally, industry-government collaboration ensured continuous consultation, making the policy flexible and responsive to industry needs.

Challenges and Limitations

Despite its success, the PLI scheme has shown uneven performance across sectors, with only about 10% of the total outlay disbursed, indicating implementation gaps.

Many sectors suffer from lack of export focus, high input costs due to tariffs, and poor GVC integration, limiting their success. Moreover, India still faces dependence on imported high-value components, resulting in low domestic value addition.

External challenges such as rising global protectionism and competition from countries like Vietnam also pose risks.

Way Forward

To replicate success, India must adopt an export-led strategy and deepen integration with global markets. It should follow an assembly-first approach to build scale, followed by gradual development of upstream capabilities.

There is a need to focus on labour-intensive sectors such as textiles, footwear, and toys to maximise employment. Additionally, tariff rationalisation is essential to ensure cost competitiveness.

Strengthening the component ecosystem through initiatives like ECMS, along with promoting MSME participation, will enhance domestic value addition. Further, institutionalised industry consultation and policy stability are critical for sustaining investor confidence.

Conclusion

The smartphone PLI demonstrates that strategic industrial policy, when aligned with export markets, labour advantages, and efficient implementation, can deliver transformative outcomes. The key challenge now is to replicate this model across sectors to achieve broad-based manufacturing growth, higher value addition, and large-scale employment generation, thereby establishing India as a global manufacturing powerhouse.