The recently notified Rs 62,500 crore Mobile Phone Manufacturing Scheme (MPMS) could encourage Indian brands to build greater technology and intellectual property capabilities, industry executives said.
Unlike the earlier production-linked incentive (PLI) scheme, which was largely focused on manufacturing scale and exports, MPMS makes design and R&D an explicit part of the incentive structure. “We expect the Indian-brand track to enable 2-3 companies to come up in this scheme,” Pankaj Mohindroo, chairman, India Cellular and Electronics Association (ICEA), said, referring to the requirement that the brand be incorporated in India and undertake R&D and design in-house in the country.
Madhav Sheth, CEO of NxtQuantum Shift Technologies, which runs the Ai+ smartphone brand, said that the R&D incentive, combined with the benefit for domestic component sourcing, should help build India’s technology capabilities and enable meaningful technology transfer.
“The scheme makes design and R&D a core part of the incentive structure rather than an incidental element of manufacturing,” Mohindroo said, adding that this would encourage Indian companies to build independent product, technology and intellectual property capabilities rather than simply assemble handsets.
The Indian-brand track also does not prescribe a fixed annual sales threshold, a feature welcomed by executives. A qualifying Indian brand can receive a flat 5% incentive on eligible sales, with an additional 1.5% for domestic component sourcing and up to 3% for Indian design and R&D.
The combined incentive can therefore reach nearly 9.5% of eligible sales. Other manufacturers and electronics manufacturing services (EMS) players, including global brands, will receive a sliding incentive of 2.25-5% on incremental sales.
The scheme comes as domestic value addition (DVA) in smartphones has already risen from 15% to 23%, Mohindroo said. The figure is expected to increase further as the Electronics Component Manufacturing Scheme (ECMS) begins supplying components to handset makers.
The ECMS has approved 106 applicants across 30 products and 15 states, involving proposed investments of Rs 69,548 crore. Components sourced under ECMS can also help handset makers earn the sourcing-linked incentive under MPMS.
However, India still needs to deepen capabilities in batteries and battery-management systems, device enclosures and display modules, while strengthening semiconductor manufacturing. Rajoo Goel, secretary general of the Electronic Industries Association of India (Elcina), said manufacturers also need to improve quality systems and skilled manpower, including capabilities around Six Sigma and zero-defect processes, as they compete with alternative manufacturing bases such as Vietnam.
“The larger opportunity is not simply about making products cheaper, it is about transferring technology and building technical know-how within India,” Sheth said.