To extend or not to extend: Smartphone PLI splits ministry-industry

Two instincts are pulling against each other inside the government’s review of the smartphone production-linked incentive (PLI) scheme. One side reasons that a scheme built to succeed should not automatically be renewed once it has succeeded — if the targets have been met, the case for continued state support needs to be made afresh, not assumed. The other side argues the opposite: that a scheme working this well is precisely the kind of intervention that should be extended, not wound down, and that stopping now would squander momentum built over six years.

That tension surfaced directly in inter-ministerial consultations, where the commerce ministry pushed the export promotion council and the industry to justify why the smartphone PLI scheme deserved an extension at all rather than being allowed to conclude on schedule. The industry’s answer, delivered to Commerce Minister Piyush Goyal, leaned entirely on scale: production under the scheme more than doubled to USD 71 billion in FY26 from USD 30 billion in FY20, and exports rose roughly tenfold, from USD 3 billion to USD 29.4 billion, over the same period.

The numbers cut both ways in this debate. To the ministry’s caution, they can read as proof that the scheme has already done its job and the ecosystem can now stand on its own. To industry, the same figures argue for continuity — domestic value addition has quadrupled to 18-19 percent in six years, a climb industry representatives contrasted with China’s roughly four-decade path to 38 percent, framing India’s progress as an unfinished trajectory rather than a completed one, especially given continuing restrictions on investment from bordering countries such as China.

The India Cellular and Electronics Association (ICEA) has positioned itself firmly on the side of continuation, ranking the smartphone PLI among the most effective industrial policy interventions the government has run and crediting it with delivering simultaneously on exports, employment, skill development, technology transfer and ecosystem creation. Mobile phones now account for 21 percent of India’s merchandise exports to the United States, with shipments to that market growing 178 percent between calendar years 2024 and 2025 to reach USD 19.7 billion — evidence, in the industry’s framing, that the trajectory is still accelerating rather than plateauing.

Yet the same submission inadvertently strengthens the ministry’s instinct for restraint. The ICEA credits much of the scheme’s success to its narrow focus — the fact that it avoided stacking multiple, sometimes competing policy objectives onto a single instrument. That argument, built to defend an extension, doubles as a caution against treating renewal as automatic: a scheme prized for its discipline is a harder one to extend informally, without the same rigour applied to defining what a second phase should specifically achieve.

Nothing in the exchange so far resolves the underlying question. The commerce ministry has signalled that continued support will need to clear a higher bar than routine renewal, while industry has made its strongest possible case for why that bar has already been cleared. Between fiscal caution and manufacturing.

CT Bureau