The government should look at extending the production-linked incentive (PLI) scheme for mobile phone production to sustain the momentum of growing exports, even as domestic value addition, both direct and indirect, increased to 23% in 2022-23, amounting to $10 billion for mobile phone manufacturing, said a study conducted by the Centre for Development Studies (CDS).
According to the report, released on Wednesday in collaboration with the India Cellular and Electronics Association (ICEA), mobile phone exports surged to $24.1 billion in 2024-25 from $0.2 billion in 2017-2018, marking an 11,950% increase. Exports now outpace domestic demand and are the primary driver of production growth.
The total domestic value addition (DVA) was estimated using the Annual Survey of Industries’ plant level data, commerce ministry’s export-import data bank and industry estimates, the report said.
The direct DVA increased to $4.6 billion in 2022-23 from $1.2 billion in 2018-19, a 283% increase. Indirect DVA rose much higher, to $3.3 billion in 2022-23 from $470 million in 2018-19, a 604% leap.
Indirect DVA, according to the study, refers to the backward linkages in the mobile phone industry including the value added by domestic suppliers of components and services used in production.
“The PLI scheme needs to continue as long as we are able to address some of the cost disabilities that the manufacturing sector is facing. Once we reach the stage where we can see that these inefficiencies are removed, we can stop,” said C. Veeramani, professor and director, Centre for Development Studies, Thiruvananthapuram.
Government officials said the renewal of the mobile phone PLI scheme is still under discussion.
“We are discussing with the industry what their further requirement is and how to support them. The aim of the PLI scheme is to continue the drive towards self-reliance. This involves examining every item, every component which is used, including machines and materials, and all elements in the bill of materials to reduce dependence,” said an official, who did not wish to be identified.
Veeramani added that for India to realise it's ambition to become a global hub for electronics manufacturing, it cannot ignore China as it is projected to remain a major player, particularly in the parts and component sector, transforming into a "lead goose" that provides technology and capital to follower countries.
This shift by China from assembly to components creates an opening for countries like India to enter the electronics value chain, an opportunity India can seize with the right policies, he added.
The CDS study said India has transitioned to a growing trade surplus in mobile phones, driven by increasing exports.
The conclusion is in stark contrast to a previous study, which claimed that when the value of imported components is accounted for, the reported trade surplus transforms into a significant deficit.
However, the CDS observed that while net exports for finished mobile phones and components remained consistently negative until January 2019, a positive trend emerged since then for the vast majority of the months.
It said only 25% of the total components imported in India are used for mobile phone production, as opposed to the previous assumption of 40% usage, refuting claims that increasing mobile phone exports are costing the exchequer in more foreign exchange outflow.
The study also addressed scepticism around the reported trade surplus in the sector due to its heavy reliance on imported components and low-margin assembly-led nature.
It recommended that the government avoid counterproductive local content mandates for its own procurement, which, according to the CDS, raises costs and reduces competitiveness.
India should prioritise achieving scale through exports, even if the DVA ratio is initially low, according to the report. It said reforms are crucial for integrating global value chains, with a focus on liberalised trade policies.
This includes resolving high and inverted tariff structures, reducing labour and land market rigidities, and improving logistical infrastructure and connectivity to lower costs, said the CDS.
According to the report, released on Wednesday in collaboration with the India Cellular and Electronics Association (ICEA), mobile phone exports surged to $24.1 billion in 2024-25 from $0.2 billion in 2017-2018, marking an 11,950% increase. Exports now outpace domestic demand and are the primary driver of production growth.
The total domestic value addition (DVA) was estimated using the Annual Survey of Industries’ plant level data, commerce ministry’s export-import data bank and industry estimates, the report said.
The direct DVA increased to $4.6 billion in 2022-23 from $1.2 billion in 2018-19, a 283% increase. Indirect DVA rose much higher, to $3.3 billion in 2022-23 from $470 million in 2018-19, a 604% leap.
Indirect DVA, according to the study, refers to the backward linkages in the mobile phone industry including the value added by domestic suppliers of components and services used in production.
“The PLI scheme needs to continue as long as we are able to address some of the cost disabilities that the manufacturing sector is facing. Once we reach the stage where we can see that these inefficiencies are removed, we can stop,” said C. Veeramani, professor and director, Centre for Development Studies, Thiruvananthapuram.
Government officials said the renewal of the mobile phone PLI scheme is still under discussion.
“We are discussing with the industry what their further requirement is and how to support them. The aim of the PLI scheme is to continue the drive towards self-reliance. This involves examining every item, every component which is used, including machines and materials, and all elements in the bill of materials to reduce dependence,” said an official, who did not wish to be identified.
Veeramani added that for India to realise it's ambition to become a global hub for electronics manufacturing, it cannot ignore China as it is projected to remain a major player, particularly in the parts and component sector, transforming into a "lead goose" that provides technology and capital to follower countries.
This shift by China from assembly to components creates an opening for countries like India to enter the electronics value chain, an opportunity India can seize with the right policies, he added.
The CDS study said India has transitioned to a growing trade surplus in mobile phones, driven by increasing exports.
The conclusion is in stark contrast to a previous study, which claimed that when the value of imported components is accounted for, the reported trade surplus transforms into a significant deficit.
However, the CDS observed that while net exports for finished mobile phones and components remained consistently negative until January 2019, a positive trend emerged since then for the vast majority of the months.
It said only 25% of the total components imported in India are used for mobile phone production, as opposed to the previous assumption of 40% usage, refuting claims that increasing mobile phone exports are costing the exchequer in more foreign exchange outflow.
The study also addressed scepticism around the reported trade surplus in the sector due to its heavy reliance on imported components and low-margin assembly-led nature.
It recommended that the government avoid counterproductive local content mandates for its own procurement, which, according to the CDS, raises costs and reduces competitiveness.
India should prioritise achieving scale through exports, even if the DVA ratio is initially low, according to the report. It said reforms are crucial for integrating global value chains, with a focus on liberalised trade policies.
This includes resolving high and inverted tariff structures, reducing labour and land market rigidities, and improving logistical infrastructure and connectivity to lower costs, said the CDS.
