PLI Incentives and Supplier Upgrading in Indian Electronics Manufacturing

Strategic state interventions in contemporary developing economies increasingly rely on performance-conditioned fiscal incentives to stimulate domestic manufacturing capacity and integrate into cross-border production networks. The Production Linked Incentive scheme in India represents a major industrial policy shift designed to scale output, curb import dependence, and foster technological competitiveness across priority sectors such as mobile handsets and electronic components [1], [5]. By tying disbursements to incremental sales over a baseline year, the policy attempts to position the domestic economy as a central node in reconfiguring global supply chains [3], [5].

Despite substantial increases in aggregate assembly volumes and finished goods exports, structural deficiencies remain pervasive in the underlying component manufacturing ecosystem. The expansion of final assembly operations has not automatically translated into deep domestic backward linkages or technological spillovers [4]. Local manufacturing continues to exhibit high import reliance for sub-assemblies, precision capital goods, and critical inputs, leaving small and medium enterprises largely excluded from high-tier supplier networks [4], [8]. Consequently, value capture remains constrained within narrow assembly-oriented segments rather than functional design or component fabrication [4].

Addressing this divergence between gross volume expansion and genuine industrial deepening requires rigorous examination of how output subsidies interact with supplier upgrading mechanisms. This inquiry evaluates the structural mechanics of target incentives, assesses the institutional determinants of domestic value addition, and explores the institutional barriers confronting local component manufacturers [1], [4]. Using documentary analysis and secondary trade literature, the investigation establishes a systematic framework for understanding industrial upgrading in electronics under targeted performance-based subsidies [2], [4].

Through this multi-tier evaluation, the work articulates actionable policy insights to support the evolution of national industrial strategies beyond volume-centric metrics. By synthesising evidence across global value chain literature and official policy frameworks, the research demonstrates the necessity of integrating capability-building programmes, technology transfer mandates, and MSME integration strategies to achieve durable domestic value addition across the electronics value chain [4], [5].