PLI 2.0 Pushes Deeper Localization as India Targets 55% Value Addition

India’s push for a revamped Production-Linked Incentive (PLI) 2.0 scheme for smartphones comes at a critical inflection point for its electronics manufacturing ambitions.

While the first phase of the PLI scheme successfully transformed the country into a global assembly and export hub, it also exposed a structural gap and India still captures a fairly small share value in the smartphone supply chain.

This is precisely why PLI 2.0 is being designed with a sharper focus on domestic value addition, targeting more than 55 percent localization. The timing reflects a strategic shift in policy thinking from scaling volumes to capturing value.

Why Now

Over the past five years, India has emerged as one of the fastest-growing smartphone manufacturing hubs globally, driven largely by the original PLI scheme launched in 2020. The program delivered strong results in terms of production scale, exports, and investments, with companies exceeding several initial targets.

However, beneath this success lies a deeper challenge. Despite rising output, a significant portion of high-value components such as chipsets, display panels, and camera modules continues to be imported. These components account for nearly 55–60 percent of a smartphone’s total cost, limiting India’s ability to retain economic value within its borders.

Government estimates indicate that only around 18–20 percent of the total value in electronics manufacturing is currently generated domestically. This gap has become more pronounced as exports scale up, prompting policymakers to reassess the structure of incentives.

Officials said that concerns raised by the finance ministry around import dependency and limited localization played a key role in accelerating the PLI 2.0 proposal. The Expenditure Finance Committee has pushed for stronger provisions that directly link incentives to domestic sourcing and backward integration.

At the same time, global supply chain disruptions, geopolitical tensions, and the need for resilient manufacturing ecosystems have further underscored the importance of building local capabilities. For India, reducing reliance on imports in strategic sectors like electronics is no longer just an economic goal, it is a strategic imperative.

Also Read: Challenges in India’s EV Ecosystem & How Startups Can Scale Ethically

Why It Matters

PLI 2.0 is not just an extension of an existing scheme and it represents a structural upgrade in India’s manufacturing strategy. By aligning the scheme with the Rs 40,000 crore Electronics Component Manufacturing Scheme (ECMS), the government aims to create a more integrated ecosystem that supports both assembly and component production.

The revised approach is expected to incentivize companies that manufacture or source critical components locally, including lithium-ion batteries, display assemblies, and camera modules. This could trigger the development of a domestic supplier base, reduce import bills, and improve cost competitiveness over time.

Moreover, deeper localization has significant economic implications. Higher domestic value addition translates into greater job creation, improved technology transfer, and stronger industrial capabilities. It also enhances India’s positioning in global value chains, moving it closer to becoming a full-spectrum manufacturing hub rather than just an assembly destination.

Industry experts acknowledge that achieving over 55 percent value addition will be challenging and will take time. However, they also emphasize that such ambitious targets are essential to catalyze long-term ecosystem development.

Another critical aspect is export competitiveness. As global companies diversify their supply chains beyond traditional manufacturing bases, India has an opportunity to position itself as a reliable alternative. A strong domestic component ecosystem can make Indian manufacturing more attractive by reducing lead times, lowering costs, and ensuring supply stability.

Bottom Line

The rollout of ECMS, under which dozens of component manufacturing facilities are currently being set up, is expected to complement PLI 2.0. As these facilities become operational, they could accelerate localization and help India bridge the value gap more effectively.

Ultimately, PLI 2.0 signals a maturing of India’s industrial policy from incentive-driven scale to capability-driven growth. It reflects a broader vision of building resilience, competitiveness, and self-reliance in one of the world’s most critical manufacturing sectors.

If successfully implemented, the scheme could redefine India’s role in the global electronics landscape, shifting it from a volume player to a value creator.