The new mobile phone manufacturing scheme (MPMS) is attempting something that the first production-linked incentive (PLI) scheme could not: create an Indian smartphone brand with the scale, technology, and product capabilities to compete with global and Chinese rivals. The distinction matters.
The first mobile PLI was overwhelmingly about manufacturing success, attracting Apple’s suppliers, Samsung, and other global manufacturers, and turning India into a major production and export base. It also had a separate category for domestic companies, with the stated objective of creating Indian manufacturing champions.
Lava, Bhagwati Products (Micromax), Optiemus, Padget Electronics, and United Telelinks Neolyncs were among those approved under that category. Yet the domestic companies, barring exceptions such as Dixon Technologies, struggled to meet the scheme’s incremental production targets.
The lesson from the first PLI should therefore be central to assessing the new scheme. The problem was not simply that Indian companies lacked a production incentive. They lacked the scale, product differentiation, technology, distribution, and brand strength to take on Samsung, Xiaomi, Vivo, Oppo, and others in a fiercely competitive market.
Indeed, the experience of the first PLI showed how much easier it was for a company with an established global brand and large manufacturing orders to scale production than for an Indian company to build a consumer brand at the same time.
The government is now trying to address that gap by making the second segment of MPMS explicitly about the ownership of the product, rather than merely its manufacture.
That is the right direction, but it also raises the harder question of whether subsidies can solve what is fundamentally a product and market problem. The new scheme is considerably more targeted: an Indian brand must have more than 51% Indian ownership, Indian management control, hold its intellectual property and trademark in India, and have in-house design and research and development (R&D) capabilities in the country.
It can receive 5% on eligible sales, another 3% for Indian design and R&D, and up to 1.5% for domestic sourcing. This is more meaningful than simply subsidising output. But the government should be careful not to equate an Indian-owned company with an Indian product. Ownership is only the starting point.
The real test is whether these companies develop technology and designs that consumers choose over established alternatives, build scale without continually depending on state support, and eventually export products because they are competitive, rather than because they are subsidised.
The government’s decision to ask prospective Indian brands to develop designs that can compete with the best in their segments is therefore more important than the size of the Rs 62,500-crore outlay. If, as Electronics and Information Technology Minister Ashwini Vaishnaw says, three companies can bring such products to market within 10-14 months, the government will get an early indication of whether the new approach is working.
But it should measure success differently this time. The first PLI demonstrated that India could manufacture smartphones at scale; the new scheme has to demonstrate that Indian companies can design, own, and sell smartphones at scale.
The ultimate measure should not be how many companies qualify for incentives, or how much production they generate while the incentives last, but whether at least one Indian brand emerges strong enough to compete when the subsidy disappears. Otherwise, India risks repeating the manufacturing success of the first PLI without solving the more difficult problem it has now set itself: building a product company of its own.