BRICS Industrial Intelligence

Executive Summary

The Production Linked Incentive (PLI) Scheme for IT Hardware, approved by the Union Cabinet on May 17, 2023, is India's flagship industrial policy instrument for building domestic manufacturing capacity in laptops, tablets, all-in-one PCs, servers, and ultra-small form factor devices. With a total outlay of Rs. 17,000 crore (approximately $2.05 billion) over six years (FY2023-24 to FY2028-29), the scheme replaces and substantially expands the earlier PLI 1.0 for IT Hardware (notified in 2021), which had limited uptake due to stringent eligibility thresholds and narrow product coverage. PLI 2.0 introduces a tiered incentive structure offering 4-6% of net incremental sales as cash incentives to manufacturers who establish or expand production in India. As of 2023, India imported over 80% of its laptop and tablet requirements, representing a strategic vulnerability. The scheme aims to catalyse Rs. 2.43 lakh crore in total production and generate direct and indirect employment for approximately 75,000 people over the scheme period.

Key Provisions

Tiered Incentive Structure. The scheme offers incentive rates ranging from 4% to 6% of net incremental sales over a base year, with higher rates for firms committing to larger domestic value addition. Incentives are disbursed annually upon verification of production volumes and value addition thresholds by the Project Management Agency (PMA).

Eligible Product Categories. PLI 2.0 covers laptops, tablets, all-in-one PCs, servers, and ultra-small form factor devices. This represents a significant expansion over PLI 1.0, which had narrower product definitions. Each product category has defined minimum investment and incremental production thresholds.

Minimum Investment Thresholds. Applicants must commit to minimum incremental investment over the base year. The thresholds are calibrated to attract both large global OEMs and domestic manufacturers. For laptops and tablets, the minimum incremental investment is Rs. 20 crore for domestic companies and Rs. 50 crore for global companies.

Domestic Value Addition Requirements. Beneficiaries must achieve specified levels of domestic value addition, increasing progressively over the scheme period. Starting at a minimum of 20% in the first year, the requirement escalates to encourage deepening of the local supply chain and component ecosystem.

Application and Selection. The Ministry of Electronics and IT (MeitY) conducts the selection process. Applicants are evaluated based on proposed investment, incremental production commitments, domestic value addition plans, employment generation, and technology transfer potential. Selected companies enter into agreements with MeitY specifying annual targets.

Compliance and Clawback. The scheme includes provisions for annual target verification, with incentives reduced or clawed back if manufacturers fail to meet committed production volumes or value addition levels. Persistent non-compliance leads to disqualification from the scheme.

Goals and Timelines

Parameter	Target
Total scheme outlay	Rs. 17,000 crore
Scheme duration	6 years (FY2023-24 to FY2028-29)
Expected production	Rs. 2.43 lakh crore
Employment generation	~75,000 direct and indirect
Domestic value addition	20% minimum, increasing progressively
Target product segments	Laptops, tablets, all-in-one PCs, servers, ultra-small form factor

Year 1 (FY2023-24) focused on onboarding manufacturers and initial production ramp-up. Years 2-4 target scaling production volumes and deepening the component supply chain. Years 5-6 aim for self-sustaining domestic manufacturing at globally competitive quality and cost levels.

Implementation Mechanisms

Project Management Agency. MeitY appoints a PMA to handle day-to-day scheme administration, including application processing, annual target verification, incentive calculation, and compliance monitoring. The PMA serves as the primary interface between beneficiaries and the government.

Annual Verification Process. Each year, beneficiaries submit production data, investment documentation, employment records, and domestic value addition calculations. The PMA verifies these claims through documentation review and facility inspections before recommending incentive disbursement.

Inter-Ministerial Committee. An Empowered Committee comprising representatives from MeitY, Ministry of Finance, Department for Promotion of Industry and Internal Trade (DPIIT), and NITI Aayog provides strategic oversight and resolves policy-level issues.

Integration with Component Ecosystem Schemes. PLI 2.0 for IT Hardware is designed to work in conjunction with the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and the India Semiconductor Mission, creating a layered incentive structure that addresses the full manufacturing value chain from components to finished products.

Industry Impact

The PLI 2.0 Scheme for IT Hardware addresses a critical gap in India's electronics manufacturing ecosystem. While India had successfully attracted large-scale mobile phone manufacturing under the PLI for Large Scale Electronics Manufacturing (mobile phones), the IT hardware segment -- particularly laptops and servers -- remained almost entirely import-dependent.

Global Supply Chain Diversification. The scheme is positioned within the broader global trend of supply chain diversification away from concentration in China. Major OEMs including HP, Dell, Lenovo, and ASUS have expressed interest or committed to establishing manufacturing operations in India under the scheme. This creates an opportunity for India to capture a meaningful share of the global IT hardware manufacturing market.

Component Ecosystem Development. By requiring progressive increases in domestic value addition, the scheme incentivizes the development of a local component supply chain. This has catalytic effects beyond IT hardware, benefiting adjacent sectors such as mobile manufacturing, automotive electronics, and industrial electronics that rely on overlapping component ecosystems.

Import Reduction. India's IT hardware imports exceeded $8 billion annually prior to the scheme. Successful implementation could reduce import dependency from over 80% to below 50% for key product categories, improving the trade balance and enhancing supply chain resilience for critical digital infrastructure components.

Employment and Skills. The estimated 75,000 jobs encompass not only assembly line positions but also design engineering, quality assurance, supply chain management, and after-sales service roles. The geographic distribution of manufacturing facilities across multiple states contributes to regional economic development.

Challenges. Key implementation challenges include the limited existing component ecosystem in India (requiring simultaneous development of upstream supply chains), competition from established manufacturing hubs in China and Vietnam with mature ecosystems and lower costs, and the need for rapid skill development to staff new manufacturing facilities.

Amendment History

The PLI 2.0 Scheme for IT Hardware was approved by the Union Cabinet on May 17, 2023, replacing the original PLI for IT Hardware notified on March 3, 2021. The revision was prompted by the limited industry response to PLI 1.0, which attracted only a handful of applicants due to high eligibility thresholds, narrow product scope, and incentive rates considered insufficient relative to the cost differential with established manufacturing locations. PLI 2.0 addressed these concerns by lowering investment thresholds, broadening product coverage, introducing tiered incentive rates, and extending the scheme duration. MeitY subsequently issued detailed operational guidelines and opened multiple application windows to maximize industry participation.

PLI Scheme for IT Hardware