India’s PLI scheme appears to be working

• The Indian government introduced its Production Linked Incentive (PLI) scheme for mobile handsets in 2020 and extended it to networking equipment three years ago
• The programme incentivises domestic production of products rather than relying on imports
• Thousands of jobs have been created, the value of exports is rising and nearly all mobile devices sold in the country are made locally

The introduction by the Indian government of the Production Linked Incentive (PLI) scheme for the mobile device sector in 2020, and its subsequent expansion in 2021 to also cover networking equipment, has had a dramatic impact on the country’s previously moribund mobile phone and networking technology industry, according to the country’s Ministry of Communications. 

India’s Prime Minister Narendra Modi has been on a mission to bolster the country’s production infrastructure and capabilities across all sectors for many years in an effort to boost the economy and reduce India’s reliance on imports: For example, the country’s Make in India initiative was introduced shortly after Modi came to power in 2014. 

As part of a broader initiative to incentivise foreign manufacturers to start or increase production in India, as well as encourage domestic manufacturers to expand their production and ramp up their exports, in April 2020 Modi’s government introduced the PLI scheme. It was launched initially for the mobile device sector but was soon expanded to cover others, including the telecom networking sector (routers, radio access network equipment, etc.) in February 2021. 

According to the Ministry of Communications, in the three years since the Telecom PLI scheme (not including mobile devices) was introduced, scheme investments have hit 34bn rupees ($407m), the value of telecom equipment production by companies involved in the scheme has exceeded 500bn rupees ($6bn), the value of telecom equipment exports has hit 105bn rupees ($1.26bn) and more than 17,800 jobs have been created (plus “many more” indirect jobs). 

Keep in mind that prior to the introduction of PLI, the value of networking product exports was negligible, as even the few local vendors that existed were making goods for domestic use and international vendors were shipping their products to India from elsewhere to sell to the likes of Reliance Jio, Bharti AIrtel and Vodafone Idea, rather than making them in-country.    

But the tide has turned, it seems. According to the Indian government, the introduction of the PLI scheme to the telecom sector has “significantly reduced the country’s reliance on imported telecom equipment, resulting in import substitution of 60%,” and the country’s network operators are now sourcing almost all of their mobile network antennae, fibre broadband GPON (gigabit passive optical network) equipment and  CPE (customer premises equipment) from domestic suppliers. “Reducing import dependency has thereby enhanced national security and fostered self-reliance,” according to the government. 

The impact on the mobile device sector has been more dramatic. According to the Ministry of Communications, only 58 million mobile devices were produced in India in the 2014-2015 financial year, while 210 million were imported. But in the 2023-2024 financial year, domestic production of mobile devices hit 330 million units, of which 50 million were then exported, while only 3 million were imported.   

As a result, the value of India’s mobile device sector exports (devices and components) has increased from 15.56bn rupees ($186m) in the 2014-2015 financial year to almost 1,290bn rupees ($15.45bn) in 2023-2024, while the value of imports has decreased from 486bn rupees ($5.8bn) in 2014-2015 to just 76.65bn rupees ($918m) in 2023-2024.   

During the past five years, the trade deficit in the overall telecom sector – networking equipment and devices combined – has reduced from 680bn rupees ($7.2bn) to just 40bn rupees ($480m), and “both the PLI Schemes have started to make Indian manufacturers globally competitive” and  “attract investment in the areas of core competency and cutting-edge technology… It has transformed India’s exports basket from traditional commodities to high value-added products,” added the government. 

And all the signs point to a continuation of this trend, especially if Jio Platforms looks to build on its early moves to build an international business based on the internal telecom products it has developed for India’s mobile services market leader, Reliance Jio – see Is India’s Jio heading for an IPO?

- Ray Le Maistre, Editorial Director, TelecomTV