On 21 August 2026, the Ministry of Electronics and Information Technology (MeitY) notified the Mobile Phone Manufacturing Scheme (MPMS), with a budgetary outlay of ₹62,500 crore and a tenure of five years, from FY 2026-27 to FY 2030-31. Announcing it, IT Minister Ashwini Vaishnaw said India should see its first strong indigenous mobile brand by mid-2027, and insisted that for a firm to qualify as Indian, the design, intellectual property and brand must be Indian-owned. The scheme projects cumulative production of about ₹39 lakh crore and roughly 60,000 direct jobs.
Read only the headline and MPMS looks like a bigger version of the scheme it replaces. Read the fine print and it is an attempt to fix that scheme's central defect.
What the notification actually contains
MPMS splits applicants into two target segments, and the split is the whole design.
| Target Segment 1 | Target Segment 2 | |
|---|---|---|
| Purpose | Incentivise mobile phone manufacturing at scale | Support Indian mobile phone brands |
| Base incentive | 2.25% to 5%, differentiated | 5%, plus 3% for Indian design and R&D |
| Entry turnover (FY 2025-26) | ₹10,000 crore | ₹1,000 crore |
| Annual threshold | ₹5,000 crore over and above FY 2025-26 sales | Gestation period of 1 year permitted |
| Extra for domestic sourcing | Up to 1.5% | Up to 1.5% |
An "Indian Brand" under TS2 is defined tightly: registered or incorporated in India, IP and trademark held within India, management control with Indian citizens, more than 51% shareholding held by Indian citizens, and in-house R&D and design capability in India. A new brand entering TS1 becomes eligible only after crossing ₹10,000 crore in annual India sales, and must then keep meeting the ₹5,000 crore year-on-year threshold. Applicants may be manufacturers or Electronics Manufacturing Services (EMS) providers registered in India, and incentives are computed brand-wise.
The domestic-sourcing bonus carries its own condition: the 1.5% applies only where the component is localised for at least 25% of total units manufactured in the financial year. That threshold is what stops a token localisation on one low-volume model from unlocking the top rate.
Why the old scheme needed replacing
The PLI Scheme for Large Scale Electronics Manufacturing (PLI-LSEM) was notified on 1 April 2020 with an outlay in the region of ₹41,000 crore — reported as ₹40,995 crore in MeitY's own material and as ₹40,951 crore elsewhere, a discrepancy worth flagging rather than resolving silently. It ran until 31 March 2026. By any output measure it worked. India is now the world's second-largest manufacturer of mobile phones by volume; 99.2% of handsets used in India are made in India; and smartphones became India's single largest export category in 2025, worth about USD 30 billion, displacing petroleum products and cut diamonds from the top of the list. Mobile phone exports rose from roughly ₹1,500 crore in 2014-15 to about ₹2.59 lakh crore in 2025-26, and electronics production grew from around ₹1.9 lakh crore to ₹13.11 lakh crore over the same decade.
And yet the criticism never went away, because volume is not the same as value. This is the distinction the whole topic turns on, and it is worth learning as a chain of terms used in the CDS/OTA economy notes.
Assembly versus manufacturing: SKD, CKD and value addition
A phone can arrive in India in several states of completeness. CBU — completely built up — is a finished handset, nothing left to do. SKD, semi-knocked down, arrives as large pre-assembled modules that need only to be snapped together and boxed. CKD, completely knocked down, arrives as individual parts requiring real assembly work. India's tariff policy has for a decade deliberately taxed these differently, so that the more finished the import, the higher the duty — the mechanism that made local assembly cheaper than importing a finished phone.
That mechanism has a name: the Phased Manufacturing Programme (PMP), laid out from 2016 to raise local value addition year by year through a graded customs-duty calendar. Its phases moved down the bill of materials in sequence — mechanics, die-cut parts, microphones, receivers, keypads and cables first; printed circuit boards, camera modules and connectors next; display assemblies, touch panels and vibrator motors after that. In 2016, genuine local value addition was estimated at under 6% of the roughly USD 11 billion of components going into about 267 million phones made in India.
Domestic Value Addition (DVA) is the measure that matters: the share of a phone's factory-gate value actually created in India, once imported inputs are netted out. On MeitY's own account, DVA in mobile phones has moved from roughly 15% at the start of this push to about 22-23% now, and the stated target is 35-40%. Those numbers explain the scheme. If 99.2% of phones sold in India are "Made in India" but only 22-23% of each phone's value is made in India, then the remaining three-quarters is imported — and the policy problem is not output, it is depth.
The trade-deficit argument, and its honest limits
The case for MPMS usually runs through the import-substitution and trade-balance argument, and the FY 2025-26 numbers let you test it rather than assert it.
Electronics exports rose 24.7% to about USD 48 billion in 2025-26 — a genuinely strong performance driven by smartphones. But electronics imports rose 17.76% to about USD 116.17 billion, from USD 98.65 billion a year earlier, making electronics roughly 15% of India's total merchandise imports. India's overall merchandise trade deficit for FY 2025-26 was about USD 333.19 billion, against USD 283.50 billion in FY 2024-25.
So the electronics sector is running a trade deficit of roughly USD 68 billion even while smartphone exports set records — because semiconductors, display modules, camera modules and passive components all arrive from abroad. This is precisely the point former RBI Governor Raghuram Rajan has pressed: that export growth reflects assembly rather than manufacturing, that the subsidy was paid for finishing the phone in India, not for the value added in India, and that once imported content is netted out it is hard to show net exports have risen. Whatever one makes of his conclusion, the arithmetic he is pointing at is real and checkable.
MPMS answers that critique in two ways. The 1.5% domestic-sourcing bonus attaches money to depth rather than to output. And the components problem is being addressed by a separate instrument — the Electronics Component Manufacturing Scheme (ECMS), approved by the Cabinet on 28 March 2025 and notified on 8 April 2025 with an initial outlay of ₹22,919 crore, covering printed circuit boards, camera modules, optical transceivers, mechanical parts and the capital goods needed to make them. MPMS makes the phone deeper; ECMS tries to build the supply chain underneath it. Learning the two as a pair is far more useful than memorising either alone, and the scheme-versus-scheme distinctions are the kind tracked through the CDS/OTA current-affairs notes.
There is a legal wrinkle worth knowing, because it explains why the old scheme was designed the way it was. Under Article 3.1(b) of the WTO's Agreement on Subsidies and Countervailing Measures, subsidies contingent on the use of domestic over imported goods — local-content subsidies — are prohibited. That constraint is the standard explanation for why PLI paid on incremental sales rather than on domestic value added. How a 1.5% sourcing-linked top-up is structured to sit inside that boundary is a live question, and an honest answer notes it rather than glossing over it.
The cost-per-job counter-case
The employment claim invites arithmetic, and a good answer does the arithmetic openly. ₹62,500 crore against 60,000 direct jobs works out to roughly ₹1 crore of public incentive per direct job over five years. Stated bluntly that sounds indefensible, and Rajan has specifically called for the government to publish how many PLI jobs were created and at what cost per job.
Three qualifications belong alongside it, and leaving them out would be as misleading as leaving out the number.
First, the incentive is production-linked, not employment-linked — it is paid as a percentage of incremental sales, so the outlay is only disbursed if the production materialises. Against projected cumulative production of about ₹39 lakh crore, ₹62,500 crore is roughly 1.6% of output, which is a different-looking ratio from the per-job one.
Second, 60,000 is a direct-jobs figure. Electronics plants in India already employ more than 5,000 people at a single location, and some facilities reach 20,000; the indirect employment in logistics, packaging, tooling and component supply is larger, though harder to verify. For comparison, ECMS's ₹22,919 crore is projected to generate about 91,600 direct jobs — a far lower cost per job, which tells you components are more labour-intensive per rupee of subsidy than final assembly is.
Third, the strategic case is not primarily about jobs. It is about technological sovereignty — Indian-owned IP, Indian design, an Indian brand that can compete rather than an Indian address for someone else's supply chain. That objective does not have a jobs-per-rupee metric, which is exactly why it is contested. This is the tension a strong essay or interview answer should hold on both sides, and it sits at the heart of the CDS/OTA general-knowledge material on the Indian economy.
🔑 Revision block
The notification. MeitY, 21 August 2026 → Mobile Phone Manufacturing Scheme (MPMS) · outlay ₹62,500 crore · tenure 5 years, FY 2026-27 to FY 2030-31 · projected cumulative production about ₹39 lakh crore and around 60,000 direct jobs · announced by IT Minister Ashwini Vaishnaw, who set a target of India's first strong indigenous mobile brand by mid-2027.
The two segments. TS1 → mobile phone manufacturing at scale, incentive 2.25% to 5%, entry turnover ₹10,000 crore in FY 2025-26, annual threshold ₹5,000 crore above FY 2025-26 sales · TS2 → Indian brands, incentive 5% plus 3% for Indian design and R&D, entry turnover ₹1,000 crore, 1-year gestation permitted · both get up to 1.5% extra for domestic sourcing, conditional on localisation covering at least 25% of units made.
What counts as an Indian Brand. Incorporated in India · IP and trademark held in India · management control with Indian citizens · more than 51% shareholding with Indian citizens · in-house R&D and design in India.
The predecessor. PLI-LSEM → notified 1 April 2020, outlay around ₹41,000 crore (₹40,995 crore in MeitY material, ₹40,951 crore in some reports), tenure ended 31 March 2026. Its results: India the 2nd-largest mobile phone maker by volume · 99.2% of phones used in India made in India · smartphones the single largest export category in 2025, about USD 30 billion · mobile exports ₹1,500 crore (2014-15) → ₹2.59 lakh crore (2025-26).
Terms that decide the answer. CBU (finished import) → SKD (pre-assembled modules) → CKD (individual parts) → duty rises with completeness, the logic of the Phased Manufacturing Programme (2016) · DVA = value actually created in India → ~15% → 22-23% today → target 35-40%.
Figures for the counter-case. Electronics exports USD 48 billion (+24.7%) but imports USD 116.17 billion (+17.76%) in FY 2025-26 → a sectoral deficit near USD 68 billion · overall merchandise deficit USD 333.19 billion · ₹62,500 crore ÷ 60,000 jobs ≈ ₹1 crore per direct job, though the money is production-linked, works out to about 1.6% of projected output, and ECMS (₹22,919 crore, notified 8 April 2025) targets 91,600 jobs far more cheaply.
The two-sided line. India built the world's second-largest handset industry in a decade, and it did so by making assembly cheaper than importing. The unfinished half is that 99.2% Made in India coexists with only 22-23% value added in India — so MPMS moves the subsidy from where the phone is finished to how much of it is actually made here, while WTO Article 3.1(b) limits how far a local-content condition can legally go.
🎯 Practice MCQs
Q1. The Mobile Phone Manufacturing Scheme notified in August 2026 succeeds which scheme? (a) Semicon India Programme (b) PLI for Large Scale Electronics Manufacturing (c) Electronics Component Manufacturing Scheme (d) Phased Manufacturing Programme → (b) — PLI-LSEM, notified on 1 April 2020, whose tenure ended on 31 March 2026.
Q2. In mobile phone trade, "SKD" imports refer to units brought in as: (a) completely built-up finished handsets (b) semi-knocked down pre-assembled modules (c) raw semiconductor wafers (d) refurbished handsets → (b) — semi-knocked down; CKD is completely knocked down, and CBU is a finished handset.
Q3. Which criterion is not required for a firm to qualify as an "Indian Brand" under Target Segment 2 of MPMS? (a) IP and trademark held within India (b) more than 51% shareholding held by Indian citizens (c) listing on an Indian stock exchange (d) in-house R&D and design capabilities in India → (c) — stock-exchange listing is not among the criteria; the others are, along with Indian management control.
Q4. "Domestic Value Addition" in mobile phone manufacturing refers to: (a) the number of handsets assembled in India (b) the share of a phone's value actually created within India (c) the share of Indian-owned brands in the market (d) the export value of handsets → (b) — value created in India after netting out imported inputs; currently about 22-23%, against a target of 35-40%.
Q5. The Electronics Component Manufacturing Scheme (ECMS), notified in April 2025, had an initial outlay of: (a) ₹22,919 crore (b) ₹40,995 crore (c) ₹62,500 crore (d) ₹76,000 crore → (a) — ₹22,919 crore, aimed at the component ecosystem beneath finished-device assembly.
📋 How this gets asked (PYQ pattern)
Electronics manufacturing and the PLI family are a growing CDS/OTA economy set, and the framings repeat. The dependable angles are which ministry runs the scheme (MeitY, not Commerce and Industry), the outlay and tenure, matching a scheme to its sector — PLI-LSEM and MPMS for handsets, ECMS for components, Semicon India for chips — and the meaning of value addition as distinct from output. A common trap treats "99.2% of phones are Made in India" as if it meant 99.2% domestic value addition; the two figures measure completely different things, and questions are built on exactly that confusion. A second trap places electronics in a trade surplus because smartphone exports lead the export table, when the sector still runs a large import bill. Statement-type questions favour the TS1 versus TS2 contrast and the domestic-sourcing condition. The fresh 2026 hook is the ₹62,500 crore notification and the mid-2027 indigenous-brand target. We describe the pattern here, not any specific past question.
Preparing for CDS or OTA? Manufacturing policy, trade balance and the Make in India schemes are high-yield economy topics and strong essay material on self-reliance. Follow our daily CDS/OTA current affairs and train with serving-officer faculty in the upcoming Cavalier courses in Delhi.
✍️ Written by Hitendra Deswal — Economy & current-affairs faculty at The Cavalier. Reviewed by the Cavalier Faculty Desk. The Cavalier, founded by ex-Army officers, has trained NDA/CDS/SSB aspirants since 2001 (Facebook · YouTube).
Source: PIB / Ministry of Electronics and Information Technology, 21 August 2026. Background facts cross-verified against independent sources.