India has approved a new policy framework to expand mobile phone manufacturing, deepen domestic value addition and strengthen the country’s position in global electronics supply chains.
On 15 July 2026, the Union Cabinet approved the Mobile Phone Manufacturing Scheme (MPMS), with a budgetary outlay of ₹62,500 crore. The scheme will operate for five years, from FY 2026-27 to FY 2030-31. It provides production-linked incentives for mobile phones manufactured in India, together with additional support for domestic component sourcing and product design and research undertaken by Indian brands.
The scheme is commercially relevant not only for established mobile phone manufacturers. It may also create opportunities for electronics manufacturing services companies, domestic brands, component suppliers, technology partners, testing service providers and manufacturers of production equipment.
However, the investment opportunity cannot be assessed solely on the basis of the headline incentive rate. Commercial viability will depend on customer demand, product positioning, localisation feasibility, manufacturing capability, capital requirements, operating margins and compliance with the detailed scheme conditions.
India’s Mobile Phone Manufacturing Base Has Expanded Substantially
India is now the world’s second-largest mobile phone manufacturer by volume. According to the Government, approximately 99.2% of the mobile phones used in India are manufactured domestically. Smartphones also became India’s largest exported product category in calendar year 2025.
Mobile phone production increased from approximately ₹18,000 crore in FY 2014-15 to ₹5.5 lakh crore in FY 2024-25. During the same period, mobile phone exports increased from around ₹1,500 crore to ₹2 lakh crore. More than 300 mobile manufacturing units are currently operating in India.
The earlier phase of policy support helped India develop substantial assembly capacity and become a competitive export location. The next challenge is to increase the proportion of components, engineering, technology and intellectual property generated domestically.
MPMS has been structured around this requirement.
Key Features of the Mobile Phone Manufacturing Scheme
The Cabinet approval sets out the broad framework of MPMS.
| Parameter | Approved provision |
|---|---|
| Budgetary outlay | ₹62,500 crore |
| Scheme tenure | Five years |
| Applicable period | FY 2026-27 to FY 2030-31 |
| Base incentive | 2.25% to 5% of eligible sales |
| Domestic sourcing incentive | Additional incentive of up to 1.5% |
| Indian brand incentive | Additional 3% of eligible sales for product design and R&D |
| Expected cumulative production | Approximately ₹39 lakh crore |
| Expected direct employment | Around 60,000 jobs |
The Government expects the scheme to support approximately ₹39 lakh crore of cumulative mobile phone production during its tenure, along with a significant increase in exports and the creation of around 60,000 direct jobs.
Detailed operational provisions, including applicant categories, qualifying products, investment thresholds, sales conditions, domestic sourcing definitions and claim procedures, will need to be assessed once the relevant scheme guidelines and administrative documents are issued.
Incentive on Eligible Sales
MPMS provides incentives ranging from 2.25% to 5% of eligible sales arising from mobile phones manufactured in India.
The differentiated rate structure indicates that the incentive may vary according to the applicant category, product segment, performance level or other qualifying conditions. These details will be important in determining the actual financial benefit available to an individual project.
Manufacturers should therefore avoid applying the maximum incentive rate to their financial projections without first confirming:
- The category under which the company may qualify
- The applicable sales and investment thresholds
- The definition of eligible products and sales
- The period for which incentives will be available
- Whether incremental production or other performance conditions will apply
- The documentation required to support incentive claims
The timing of incentive recognition and receipt will also influence project cash flows and working capital requirements.
Additional Incentive for Domestic Sourcing
The scheme provides an additional incentive of up to 1.5%, linked to domestic sourcing of specified components and sub-assemblies.
This provision is central to the scheme’s localisation objective. It creates a direct commercial linkage between finished mobile phone manufacturing and the development of domestic component capacity.
A mobile phone may be assembled in India while continuing to depend substantially on imported displays, chipsets, camera modules, printed circuit boards, sensors, batteries, memory devices and other high-value inputs. In such cases, domestic production may increase without generating a proportionate increase in domestic value addition.
The localisation incentive is intended to encourage manufacturers to identify and develop Indian sources for qualifying inputs.
However, localisation decisions must remain commercially and technically viable. A manufacturer will need to assess:
- Availability of suitable Indian suppliers
- Supplier production capacity
- Product quality and reliability
- Customer approval requirements
- Price competitiveness against imported components
- Tooling and qualification expenditure
- Lead times and delivery performance
- Dependence on imported raw materials within locally produced components
- Traceability and documentation of domestic sourcing
A credible localisation strategy should therefore be developed at the bill-of-material level rather than being expressed only as an aggregate sourcing percentage.
Additional Support for Indian Brands
MPMS provides an additional incentive of 3% of eligible sales for Indian brands undertaking product design and research and development.
This provision seeks to support activities beyond contract assembly. It recognises that a larger share of economic value is retained when an enterprise controls the product architecture, engineering, intellectual property and brand.
Potential areas of qualifying capability may include:
- Industrial and hardware design
- Product architecture
- Software and hardware integration
- Testing and validation
- User-interface development
- Product security
- Intellectual property creation
- Prototype development
- Product adaptation for Indian and international markets
The final guidelines will need to clarify how an Indian brand is defined and what expenditure, infrastructure, personnel and intellectual property arrangements will qualify as eligible design and R&D activities.
Indian ownership or branding alone may not be sufficient. Applicants may be required to demonstrate substantive product development capabilities, engineering resources and control over relevant technology or design rights.
Business Opportunities Under MPMS
Mobile Phone Manufacturers
Existing manufacturers may evaluate expansion of production capacity, introduction of additional product lines, greater allocation of export orders to Indian facilities and progressive localisation of components.
Their assessment should consider whether the incremental investment and sourcing commitments required under the scheme are commercially justified by expected production volumes and incentive benefits.
Electronics Manufacturing Services Companies
Electronics manufacturing services companies may benefit from increased production mandates from global and domestic brands.
However, future competitiveness is likely to depend on capabilities extending beyond assembly. Manufacturers may need stronger systems for:
- Supplier development
- Procurement and materials planning
- Production traceability
- Testing and quality assurance
- New-product introduction
- Process engineering
- Yield improvement
- Customer-specific compliance
- Domestic component qualification
Companies capable of supporting the localisation requirements of their customers may be better positioned to secure longer-term manufacturing relationships.
Indian Mobile Phone Brands
The design and R&D incentive creates a specific opportunity for Indian brands seeking to develop proprietary products.
Commercial success will nevertheless depend on more than scheme qualification. Indian brands must compete on product performance, pricing, distribution, software support, service networks, consumer confidence and speed of product development.
Businesses entering this segment should evaluate whether they possess or can develop:
- A clearly differentiated product proposition
- Access to suitable design and technology partners
- Adequate distribution and after-sales capability
- Product development and certification resources
- Working capital for inventory and channel expansion
- Sufficient scale to remain price-competitive
Component and Sub-Assembly Manufacturers
The domestic sourcing incentive may increase demand for components and sub-assemblies manufactured in India.
Potential opportunity areas may include:
- Printed circuit boards and assemblies
- Display and camera modules
- Battery systems
- Chargers and power-management components
- Enclosures and mechanical parts
- Connectors, cables and electro-mechanical components
- Passive electronic components
- Testing fixtures and tooling
- Production and inspection equipment
The opportunity for individual suppliers will depend on their ability to meet the cost, quality, scale and technical requirements of mobile phone manufacturers.
Supplier qualification can also take considerable time. Component manufacturers may require customer audits, technical validation, process certification and sustained production trials before becoming approved vendors.
Relationship with the Electronics Components Manufacturing Scheme
MPMS forms part of a wider policy effort to develop India’s electronics manufacturing ecosystem.
The Electronics Components Manufacturing Scheme, or ECMS, was notified in April 2025 to support domestic production of electronic components. Its original outlay of ₹22,919 crore was increased to ₹40,000 crore under the Union Budget 2026-27. The scheme has a six-year tenure, with an optional one-year gestation period.
The two schemes have complementary roles:
- MPMS supports the manufacture and sale of finished mobile phones.
- ECMS supports the production of components, sub-assemblies and related manufacturing inputs.
The effectiveness of MPMS localisation incentives will depend partly on whether domestic suppliers supported through ECMS can provide the required products at internationally competitive prices and quality standards.
Manufacturers should therefore assess the two schemes as parts of an integrated electronics value chain rather than as independent incentive programmes.
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How Hmsa Consultancy Services Can Support
Hmsa Consultancy Services can assist businesses evaluating opportunities arising from MPMS and the wider electronics manufacturing ecosystem.
The scope of support may include:
- Assessment of the proposed project and business concept
- Market size and customer-demand evaluation
- Product and capacity planning
- Domestic sourcing and localisation assessment
- Identification of potential suppliers, customers and technology partners
- Manufacturing and operating model development
- Location and infrastructure evaluation
- Capital expenditure and working capital assessment
- Financial modelling and incentive sensitivity analysis
- Feasibility study and detailed project report preparation
- Risk assessment and implementation planning
- Strategic review of expansion or diversification opportunities
For existing manufacturers, the assessment may focus on capacity expansion, customer allocation, domestic sourcing and financial implications. For new entrants, a wider evaluation may be required covering market entry, technology, customer development, operating capability, funding and implementation readiness.
Conclusion
The Mobile Phone Manufacturing Scheme represents a substantial policy commitment to the next phase of India’s electronics manufacturing development.
India has already built significant mobile phone production and export capacity. MPMS now places greater emphasis on domestic component sourcing, supply-chain resilience, Indian brands, product design and R&D.
This creates opportunities across the mobile phone value chain, including finished-product manufacturing, electronic components, sub-assemblies, tooling, testing, design and manufacturing equipment.
However, incentive availability does not by itself establish project viability. Successful investments will require confirmed demand, competitive manufacturing costs, suitable technology, reliable suppliers, adequate working capital and robust compliance systems.
Businesses evaluating MPMS-linked opportunities should therefore undertake an integrated commercial, operational and financial assessment before finalising their investment plans.
Reference: Economic Times
