India PLI at Five: Modi 3.0 Capex, the Electronics Export Ramp, and the Subsidy Reckoning of 2026

Where the program stands at the FY26 inflection #

The PLI scheme, notified across 14 sectors between March 2020 and the FY22 Budget, carries a cumulative approved outlay of roughly INR 1.97 lakh crore (about USD 24 billion at INR 88.40 per dollar). DPIIT's most recent consolidated update, reflected in the Press Information Bureau release dated August 21, 2024 and reiterated in the Ministry of Commerce and Industry annual report, reports cumulative investment of about INR 1.46 lakh crore, production and sales of about INR 12.50 lakh crore, exports above INR 4.00 lakh crore, and direct and indirect employment of roughly 9.5 lakh as of March 2024. Disbursed incentives stood at INR 9,721 crore at that point, a fraction of the headline envelope, with the FY24 disbursement run rate near INR 6,800 crore.

The architecture is heterogeneous. Large-scale electronics and mobile phones run on incremental sales over an FY20 base, with rates of 4 to 6 percent. The Production Linked Incentive Scheme for Auto and Auto Components carries an INR 25,938 crore outlay across champion OEM and component categories with tiered rates from 8 to 18 percent. Telecom and networking products run on INR 12,195 crore. Bulk drugs, formulations, and medical devices together carry roughly INR 21,940 crore. Specialty steel, white goods, food processing, textiles, drones, and advanced chemistry cells fill out the rest. The India Semiconductor Mission (ISM), notified separately, holds an INR 76,000 crore outlay administered by MeitY and provides up to 50 percent fiscal support on project cost rather than an output-linked subsidy.

The disbursement gap and what it signals #

Approved outlay is a ceiling. The relevant fiscal cost is the present value of expected disbursements, and the ratio of disbursed to committed incentives is the cleanest measure of binding effect. Through March 2024, INR 9,721 crore had been disbursed against INR 1.97 lakh crore of approvals, a realization rate near 5 percent of headline envelope. Mobile phones, where Foxconn, Pegatron, Wistron (now Tata Electronics), Samsung, and Dixon cleared thresholds early, account for the majority of disbursements. Bulk drugs and medical devices follow. Auto components, telecom, white goods, and textiles trail, with several anchors missing FY24 thresholds.

Three structural reasons explain the gap. Eligibility rules tie accrual to incremental sales over an FY20 base, which proved difficult for capex-heavy sectors with longer ramp curves such as advanced chemistry cells and specialty steel. Qualifying investment thresholds front-load capex risk before any payout flows. Claim verification by Project Management Agencies (IFCI for several cells, SIDBI for others) runs multi-stage audits of value addition and bill-of-materials data. The Comptroller and Auditor General review and Parliamentary Standing Committee deliberations through 2024 and 2025 flagged each of these without recommending wholesale design changes.

The practical implication for corporate strategy teams: announcement effects and balance-sheet signaling have done measurable work alongside the actual subsidy flow. Anchor firms cite PLI in capital allocation memos even when claim flows are still ahead of them. That gap collapses or persists depending on whether the incoming review ends in extensions, sunset, or selective deepening.

Electronics and Apple: the cleanest signal in the portfolio #

Mobile phone manufacturing is where PLI shows the sharpest divergence from any plausible counterfactual. ICEA and MeitY data place FY24 mobile phone production at roughly INR 4.10 lakh crore (about USD 49 billion) and exports at about INR 1.20 lakh crore (about USD 14.4 billion), more than triple FY20 export levels. The iPhone share is the most-watched cut. Bloomberg, Reuters, and the Financial Times converge on a figure near 14 percent of global iPhone units assembled in India in FY24, up from below 1 percent in FY19. Apple's calendar 2024 India production crossed USD 14 billion across Foxconn (Sriperumbudur and Devanahalli), Pegatron (Chennai), and Tata Electronics (the former Wistron Karnataka plant plus the new Hosur facility), and management has guided toward USD 40 billion or above by FY26 if the current trajectory holds.

The structural read is twofold. First, India captured the marginal iPhone unit displaced from China during the post-2022 reallocation, a move accelerated by the COVID-era Zhengzhou disruption and the broader US tariff stance. PLI lowered the landed cost differential from a high single-digit gap to inside two percentage points for mainstream models, enough to tip new-product allocation. Second, the value-addition profile is still shallow: display, advanced packaging, mainboards, and high-density connectors remain imported, so India's domestic value-added share on a finished iPhone is widely estimated in the 12 to 18 percent range. The next-stage ambition, articulated by MeitY and IBEF in 2024 and 2025 sectoral notes, is to lift that share toward 30 to 35 percent through component PLI sub-tracks, advanced packaging investments under ISM, and battery cell manufacturing under the ACC PLI.

ISM and the first wave of fab approvals #

The India Semiconductor Mission, launched in December 2021 with an INR 76,000 crore outlay, completed its first wave of approvals between February 2023 and March 2024. The cleared projects, totaling about USD 21 billion in announced capex, comprise the Tata Electronics and Powerchip Semiconductor Manufacturing Corporation (PSMC) 28 nanometer fab in Dholera (Gujarat) at roughly USD 11 billion, Micron Technology's ATMP facility in Sanand (Gujarat) at about USD 2.75 billion, the CG Power and Renesas joint venture for ATMP in Sanand at about USD 0.9 billion, the Tata Semiconductor Assembly and Test plant in Jagiroad (Assam) at roughly USD 3.3 billion, and the Kaynes Semicon ATMP at about USD 0.4 billion. Subsequent design-linked approvals and the broader ChipIN component manufacturing scheme have added to the queue without yet matching the headline magnitudes.

Two issues frame the reading. First, the 28 nanometer node anchors a domestic foundry presence but sits well behind the leading edge served by Taiwan Semiconductor Manufacturing Company and Samsung Foundry. The strategic logic is auto-grade, industrial, and analog and mixed-signal end markets where India already has design depth via global capability centers and EDA talent. Second, the absorption capacity for trained process engineers is a binding constraint that is independent of capital. The MeitY Talents in Electronics Strategic Sectors initiative and the IIT and NIT semiconductor curricula expansions are running ahead of plan in announcement terms but behind plan on delivered output relative to the 2027 ramp curve.

Modi 3.0 capex, the FY26 budget, and the macro frame #

Finance Minister Nirmala Sitharaman's Union Budget for FY26, presented on February 1, 2025, set effective capital expenditure at INR 15.48 lakh crore and central capex at INR 11.21 lakh crore against an FY25 revised estimate of INR 10.18 lakh crore. Nominal GDP growth for FY26 was projected at 10.1 percent (with a Budget assumption near 10.5 percent in the Economic Survey 2024-25). The new tax regime was expanded so that resident individuals with income up to INR 12 lakh face zero tax, a measure widely covered by Reuters, the Economic Times, and BloombergQuint as a consumption demand stimulus aimed at urban middle-income households. The fiscal deficit target was set at 4.4 percent of GDP for FY26, on a glide path toward 4.5 percent over the medium term.

The current account context is benign. The Reserve Bank of India's Bulletin places the FY24 current account deficit at 0.7 percent of GDP, supported by services exports of about USD 341 billion across the first three quarters of FY24 and goods exports of about USD 437 billion for full FY24. Workers' remittance inflows held above USD 100 billion. The rupee traded near INR 88.40 per US dollar in January 2025 after sustained intervention, with net RBI interventions using about USD 76 billion of FX reserves over FY24. For corporate hedgers, one-year forward premia compress under intervention but blow out quickly during episodic risk-off, a pattern repeated through April 2025.

Tariff exposure, scenario design, and the playbook #

On April 2, 2025, the US administration announced reciprocal tariffs of 26 percent on imports from India, paused for 90 days on April 9 to permit bilateral negotiations. The exposure is asymmetric. Mobile phones (HS 8517) carry the most material line, with India's FY25 exports to the US estimated above USD 8 billion. Pharmaceutical formulations, gems and jewelry, textiles, and engineering goods follow. A 26 percent ad valorem on iPhones implies a price impact of roughly 17 to 20 percent at retail before any pass-through compression, large enough to alter Apple's allocation if the pause expires without resolution. Reuters and Bloomberg consensus through April 2026 expects a partial bilateral deal inside calendar 2025, but the residual tariff hangs over capex sequencing.

We bound the next two years with three scenarios. Scenario one, orderly bilateral deal (45 percent probability), settles tariffs at 10 to 15 percent, electronics PLI extends with value-addition triggers above 35 percent, ISM second wave approves two more fabs, and Apple's India share moves toward 20 to 25 percent of global iPhones by FY27. Scenario two, prolonged tariff overhang (35 percent probability), keeps the 26 percent rate in force episodically, drives Apple to slow rather than reverse the India ramp, defers ACC battery anchor commitments by 12 to 18 months, and pushes the rupee to INR 91 to 93 per dollar. Scenario three, structural rupture (20 percent probability), pairs sustained tariff pressure with fiscal interruption, in which case PLI disbursements compress, ISM second wave slips beyond FY27, and the electronics export trajectory reverts toward FY24 levels.

For OEMs and contract manufacturers, anchor capacity on dual-track demand (US plus EU plus Middle East and Africa) rather than US-dependent plans, and accelerate component PLI applications to lift domestic value addition above 30 percent. For FX hedgers, extend hedge horizons to 12 months on USD short positions, layer option collars against an INR 91 break, and use cross-currency swaps where euro receivables exist. For US policymakers, durable supply chain diversification away from China requires preserving the India electronics ramp, which argues for a settlement that recognizes the current 12 to 18 percent value-addition reality. For EU policymakers running the European Chips Act, India's ATMP and 28 nanometer base offers a complementary partner for non-leading-edge resilience via the EU India Trade and Technology Council.

The honest evaluation at five years is mixed but defensible. Mobile phones earn the program a place in any industrial policy textbook. Pharmaceuticals show modest upstream uplift. Auto components, telecom, and white goods show more announcement than disbursement. Semiconductors and ACC batteries will be judged in FY28 and FY29 data. We expect Modi 3.0 to land a hybrid: sunset laggard cells by FY27, extend electronics and pharmaceuticals with renewed value-addition triggers, and concentrate outlay on the ISM second wave and an ACC deepening tranche.

Sources #

• DPIIT PLI scheme dashboard and progress notes
• Ministry of Electronics and Information Technology semiconductor mission updates
• Ministry of Heavy Industries auto PLI scheme
• Press Information Bureau release on PLI scheme cumulative status, 21 August 2024
• Union Budget 2025-26 documents and Economic Survey 2024-25
• Reserve Bank of India Bulletin and balance of payments tables
• National Statistical Office, Ministry of Statistics and Programme Implementation
• India Brand Equity Foundation electronics and semiconductor sector reports
• Reuters India electronics and Apple manufacturing coverage
• BloombergQuint Modi 3.0 budget and tariff coverage
• Economic Times PLI and capex coverage
• Financial Times Apple India and Tata Electronics coverage