Cabinet clears ₹62,500 cr MPMS scheme: 'Focus now on components, design, research'
The Union Cabinet approved the Mobile Phone Manufacturing Scheme (MPMS) with a budgetary outlay of ₹62,500 crore, to run for five years from FY 2026-27 to FY 2030-31.
The scheme replaces the Production Linked Incentive (PLI) Scheme for Large Scale Electronics Manufacturing, which concluded on 31 March 2026 after focusing primarily on assembly-stage mobile phone manufacturing.
MPMS shifts the incentive structure toward domestic sourcing of components and sub-assemblies, and toward product design and research and development (R&D), rather than assembly volumes alone.
The government has projected cumulative mobile phone production of approximately ₹39 lakh crore and exports worth ₹15 lakh crore over the scheme period, along with an estimated 60,000 direct jobs.
Production Linked Incentive (PLI) Scheme — Origin and the Electronics Sector Precedent
The PLI scheme is a Government of India instrument that offers manufacturers a financial incentive linked to incremental sales of goods manufactured domestically, rather than to capital investment alone. The PLI Scheme for Large Scale Electronics Manufacturing (LSEM), approved in April 2020, was the first PLI scheme launched and targeted mobile phones and specified electronic components, later expanded to cover ten additional sectors by the end of 2020.
Key Details
- LSEM-PLI (2020) offered incentives of 4-6% on incremental sales (over a base year) for five years, with a total outlay of approximately ₹40,995 crore.
- The scheme is credited with helping India become the world's second-largest mobile phone manufacturer by volume.
- PLI schemes are administered by the Ministry of Electronics and Information Technology (MeitY) for the electronics sector, with sector-specific nodal ministries for other PLI verticals (e.g., Department of Pharmaceuticals, Ministry of Textiles).
MPMS is the direct successor to the LSEM-PLI scheme, but with incentive design deliberately re-weighted away from pure assembly-stage output toward components, sub-assemblies, and R&D — marking a shift in industrial policy from "manufacture in India" to "design and manufacture in India."
MPMS Incentive Design — Tiered Structure for Components, Sourcing and R&D
Under MPMS, incentive rates on eligible mobile phone sales range from 2.25% to 5%, with an additional incentive of up to 1.5% available to companies that increase domestic sourcing of key components and sub-assemblies, and a further additional incentive of up to 3% for Indian brands linked specifically to product design and R&D.
Key Details
- The tiered structure (base rate + sourcing bonus + design/R&D bonus) is intended to deepen value addition within India's electronics value chain, moving beyond low-value-added final assembly.
- The scheme is administered under the Ministry of Electronics and Information Technology, consistent with the institutional structure used for the earlier LSEM-PLI scheme.
- The five-year window (FY27-FY31) mirrors the tenure structure used in most PLI-family schemes to allow companies to plan capital investment cycles.
The Cabinet's stated rationale — "focus now on components, design, research" — reflects a deliberate policy choice to reward backward integration (components) and innovation (design/R&D) over simple assembly-linked output growth, addressing a long-standing criticism that PLI-driven electronics growth was assembly-heavy with limited domestic value addition.
India Semiconductor Mission (ISM) and the Broader Electronics Ecosystem
The India Semiconductor Mission (ISM), under MeitY, is the umbrella programme for building India's semiconductor design, fabrication and packaging ecosystem, distinct from but complementary to mobile-phone-specific schemes like MPMS. ISM 2.0 was cleared with a substantially expanded outlay of about ₹1.27 lakh crore, up from roughly ₹76,000 crore under ISM 1.0, and includes the Design Linked Incentive (DLI) Scheme supporting domestic chip design startups.
Key Details
- ISM 1.0 (approved December 2021) was built around ₹76,000 crore in outlay for semiconductor and display fabs, compound semiconductors, and chip design incentives.
- ISM 2.0 expands support to semiconductor equipment, materials, advanced packaging and a wider chip design ecosystem; dozens of projects and "tapeouts" (finalised chip designs sent for fabrication) have been supported under the DLI Scheme.
- While ISM targets upstream chip design and fabrication, MPMS targets downstream consumer device (mobile phone) manufacturing — together forming a layered electronics manufacturing policy stack.
MPMS and ISM 2.0 are complementary levers of the same broader industrial policy goal — reducing import dependence in electronics — with MPMS incentivising component sourcing and design at the device level, while ISM builds the semiconductor supply base that domestic component manufacturing would eventually draw upon.
- MPMS outlay: ₹62,500 crore over FY 2026-27 to FY 2030-31 (5 years)
- Base incentive on eligible sales: 2.25% to 5%
- Additional incentive for domestic component/sub-assembly sourcing: up to 1.5%
- Additional incentive for Indian brands on design and R&D: up to 3%
- Projected cumulative mobile phone production: approximately ₹39 lakh crore
- Projected exports over scheme period: approximately ₹15 lakh crore
- Projected direct jobs: approximately 60,000
- Predecessor scheme (LSEM-PLI, 2020): ₹40,995 crore outlay, 4-6% incentive on incremental sales, ended 31 March 2026
- ISM 2.0 outlay (semiconductor ecosystem, complementary programme): approximately ₹1.27 lakh crore, up from ₹76,000 crore under ISM 1.0