India Pours Rs 1.895 Lakh Crore Into Electronics, Chip Sovereignty

India's Union Cabinet has approved Rs 1.895 lakh crore in new incentives to transform the country from a phone assembler into a technology stack owner, marking a pivot from the Production-Linked Incentive era's volume targets to value-chain depth.

The twin schemes — Rs 62,500 crore for the Mobile Phone Manufacturing Scheme (MPMS) and Rs 1.27 lakh crore for India Semiconductor Mission 2.0 (ISM 2.0) — arrive as smartphones overtook diesel fuel and cut diamonds to become India's largest export category in 2025, with the country now the world's second-largest mobile phone manufacturer by volume.

From Assembly to Ownership

The strategic shift addresses a persistent gap: while 99.2% of mobile phones used in India are now domestically manufactured, the ecosystem remained heavily dependent on imported components, equipment, and design intellectual property.

MPMS restructures incentives to reward what earlier schemes overlooked. Manufacturers receive a base incentive of 2.25-5% on eligible sales, with additional bonuses of up to 1.5% for domestic sourcing and approximately 3% for product design and R&D investments. Companies that merely assemble imported kits earn less than those building indigenous supply chains.

Semiconductor Mission Gets Longer Runway

ISM 2.0 extends its policy tenure from five to 12 years, acknowledging that capital-intensive semiconductor fabs require stability beyond typical political cycles. The mission is structured around six pillars: Design of Chips, Machines and Materials, Setting up more Fabs, Further Strengthening ATMP/OSAT, Research & Development, and skilling/talent development.

The extension follows momentum from ISM 1.0, which approved 12 semiconductor projects worth over Rs 1.64 lakh crore, including one silicon fab, two compound semiconductor fabs, and nine packaging units.

The Viksit Bharat Calculus

Both schemes align with the 'Viksit Bharat@2047' vision of India becoming a developed nation by its centenary of independence. The economic sovereignty argument is explicit: owning the technology stack reduces vulnerability to global supply chain disruptions while creating higher-quality jobs beyond low-margin assembly work.

The timing reflects competitive pressure. Southeast Asian nations have aggressively courted electronics manufacturing as companies diversify from China, but India's scale advantage — both as producer and domestic market — positions it to move up the value chain rather than compete solely on labor costs.

What Success Looks Like

Success metrics will shift from units produced to value retained domestically. Under MPMS, a manufacturer exporting phones with 60% Indian-sourced components and indigenous design earns significantly more than one assembling imported kits at scale. ISM 2.0's equipment and materials pillar specifically targets the machine tools and chemical inputs that fabs consume — a market currently dominated by US, Dutch, and Japanese suppliers.

The schemes face execution risks common to industrial policy: disbursement delays, compliance burden, and the challenge of building supplier ecosystems that take years to mature. But the revised incentive architecture signals that New Delhi has learned from the first PLI wave — scale without sovereignty is insufficient for Viksit Bharat.