PLI mobile phone is a success story in India

First, the changes in tariff policy are part of a deliberate strategy to increase domestic capacities in manufacturing and exports. Currently, 99.2% of mobile phones used in India are made in India, which is a significant increase since 2015.

Second, PLI incentives are less than 6 percent (gradually to less than 2 percent), and only on incremental production. While PLI scheme recipients hold only 20 percent of the market share, they accounted for 82 percent of mobile phone exports in the 2022-23 fiscal year. The analysis shows that the domestic value added in mobile phones is between 14 and 25 percent, depending on the model and complexity. In particular, strong development is seen in the sub-assemblies and supply chains of chargers, battery packs, headsets, mechanics, camera module and display assembly. New markets for exports have been added, including Western Europe, the Americas and developed Asia, while global supply chains are shifting to India. The green shoots in the component ecosystem, as seen with the entry of large Indian companies such as Tatas, demonstrate the positive externalities generated by such policy intervention.

We need to consider what would have happened to imports of mobile phones and their components in the absence of the PLI scheme and the time period for supply chains to be established as shown by the experience of other countries. China has built a $1.3 trillion electronics industry over 25 years, but it still lacks the capacity to make key smartphone components, such as semiconductors, memory and OLED displays, which account for 45 percent of the value. China’s electronics import was $650 billion in 2022. Vietnam, after 15 years, has a $140 billion electronics industry with an added value of 18 percent. The experiences of these countries highlight the importance of scale, particularly in exports, in increasing domestic value added.

To foster a strong electronics manufacturing ecosystem, it should be noted that various elements of the production process are at different stages of localization. While the initial focus has been on attracting large-scale mobile phone assembly to India, the next phase aims to deepen the manufacturing value chain with component localization. A nuanced understanding of this progressive transition seems to be lacking in most critical reports.

The Indian government has taken an ecosystem approach to position the country as a global hub for the design and manufacturing of electronic systems. In 2014-15, electronics production was $37 billion, with minimal value added and high reliance on imports. Over the past nine years, India has made significant progress in electronics production, which has nearly tripled to $101 billion by 2022-23 (industry estimates), exports have quadrupled to $23 billion, and the value added increased to approximately 23 percent. India’s share of global electronics manufacturing increased from 1.3% in 2012 to 3.75% in fiscal year 2021-22.

As a result of the launch of the PLI scheme for electronics, India has become the second largest mobile phone manufacturer in the world in terms of volume, with production rising to 60 million mobile phones in fiscal year 2014-15 to about 320 million in the fiscal year. 2021-22. India’s contribution to the world’s mobile phones is projected to reach 19 percent this year, from 3 percent in 2014. In value terms, mobile phone production has grown from Rs. 19,000 crore in FY 2014-15 to Rs. 3.5 trillion in fiscal year 2022-23. Of the $101 billion electronics output, smartphones make up $44 billion, including $11.1 billion in exports. There is enough evidence to establish that mobile manufacturing in India is getting deeper and broader, with domestic value added, employment and income.

The PLI scheme for large-scale electronics manufacturing has attracted an investment of Rs. 6,562 crore by the end of the fiscal year 2022-23, which has led to a total output of Rs. 2.84 trillion including exports worth Rs. 1.29 trillion, and generated 100,000 direct job opportunities and around 250,000 indirect ones. In particular, female employment accounts for 70 percent of all new jobs created. Since 2014, more than 1 million jobs have been added in the sector.

India achieved a major milestone with Apple’s decision to significantly expand iPhone production in India, including manufacturing its most advanced models. Projections indicate that a quarter of all iPhones will be manufactured in India by 2025.

In conclusion, the success of PLI schemes can be seen through their contributions in terms of employment generation, increased foreign direct investment in manufacturing, increased exports with diversification of the export basket, significant added value and the creation of a growing local value chain in many of the PLI products, especially mobile.

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The writers respectively are Secretary and Senior Economic Adviser to the Department of Domestic Trade and Industry Promotion, Government of India.