Extending PLI for Smartphone Exports

The Government of India (GoI) is considering extending the Production Linked Incentive (PLI) scheme for smartphone exports to sustain the momentum achieved in this sector. This initiative has a significant demonstration effect on other industries and communicates India's intention to become a global manufacturing hub in select sectors.

Factors Contributing to Success

• The surge in smartphone exports was aided by US tariff changes that favored India.
• Potential revival of Chinese smartphone exports to the US could occur as tariffs are reworked following a US Supreme Court verdict.
• Continued export subsidies are crucial to counteract the comparative advantages held by Chinese exporters.

Key Characteristics of the Smartphone Industry

• Apple and Samsung, leading global smartphone manufacturers, have strong plans for India, addressing market-access issues.
• Products manufactured in India represent premium offerings in handset portfolios, highlighting local manufacturing capabilities.
• Smartphones are closely linked with software development, an area where India has existing advantages.

Market Dynamics

India is a rapidly growing market for smartphones. Chinese manufacturers, who once dominated the mid-segment, are now in retreat. This opens opportunities for strong local brands to emerge.

Positive Externalities

• The ecosystem fostered by companies like Apple and Samsung will benefit broader electronics exports.
• Expanded export subsidies could enhance local value addition and lead to high-value manufacturing with increased localisation.
• Smartphone exports justify time-bound subsidies due to their employment intensity.