Communication Equipment

The government is preparing a successor to the existing telecom equipment PLI scheme, targeting backward integration and higher domestic value addition before the current programme expires in March 2027. The new scheme is expected to carry a significant outlay and shift incentives toward components manufacturing, which addresses a critical gap in India's telecom supply chain. This policy continuity reduces investment risk for manufacturers planning multi-year capacity expansions.

A ₹5,500 crore plug-and-play telecom manufacturing zone in Gwalior, backed by central and state incentives, has already attracted commitments from approximately 24–25 companies covering equipment, optical fibre, mobile devices, R&D, and 5G/6G technologies. The planned common testing laboratory and integrated ecosystem design lower entry barriers for new manufacturers and component suppliers. If fully operationalised, the zone could generate roughly 18,000 jobs and materially increase domestic production capacity.

NITI Aayog has identified telecom equipment exports as a potential $50 billion opportunity for India, increasing policy pressure to reduce import dependence and position the country as a global manufacturing hub. This assessment is likely to accelerate complementary measures such as trade facilitation, R&D incentives, and bilateral agreements that open export markets. Domestic manufacturers with scale and quality certifications stand to benefit disproportionately from this export-oriented policy push.

India's ongoing 5G network rollout and early-stage 6G research create sustained demand for base stations, small cells, optical transport, and enterprise networking equipment. The Gwalior zone's explicit focus on 5G/6G technologies signals government intent to ensure domestic supply of next-generation network components. As operator capex cycles mature, demand for network management, security, and edge computing equipment is also expected to grow.

Global equipment makers such as Belden are beginning to manufacture products like RUCKUS Ethernet switches locally in India, expanding the domestic manufacturing base and improving supply chain resilience for Indian enterprise customers. This trend of OEM localisation, incentivised by PLI benefits and proximity to a large end market, is likely to deepen as more companies seek to qualify for government procurement preferences. Increased local production also creates downstream opportunities for Indian component and sub-assembly suppliers.

India currently imports a large share of critical telecom components, semiconductors, and sub-assemblies, leaving domestic manufacturers exposed to global supply chain disruptions and currency volatility. Despite PLI incentives, building competitive domestic component supply chains requires years of investment and technology transfer. Until backward integration matures, cost structures for Indian-assembled equipment will remain partially tied to import prices.

The Gwalior Telecom Manufacturing Zone, while attracting strong early interest, faces execution risks including land acquisition timelines, utility infrastructure readiness, and regulatory clearances that could delay actual production ramp-up. Historical precedent with Indian industrial clusters shows that announced investment commitments do not always translate to operational capacity on schedule. Delays would defer the supply-chain deepening and job-creation benefits that underpin the policy rationale.

Established global vendors with decades of manufacturing scale, R&D investment, and cost efficiency continue to compete aggressively in Indian and export markets, making it difficult for nascent domestic manufacturers to achieve price parity without sustained subsidy support. Any reduction or discontinuity in government incentives post-PLI could expose domestic players to margin pressure. Indian manufacturers must rapidly build quality certifications and technology capabilities to compete beyond the protected domestic market.

New mandates such as TRAI's requirement for operators to act on AI-based caller-ID spam flags increase compliance and network-processing requirements, adding cost and complexity for equipment vendors that must update or certify products accordingly. Evolving data localisation, lawful interception, and cybersecurity regulations create an ongoing compliance burden that can slow product deployment cycles. Smaller domestic vendors with limited compliance resources may find these requirements disproportionately challenging.

Developing competitive 5G and 6G equipment requires deep engineering talent in areas such as RF design, semiconductor architecture, and software-defined networking, where India's domestic industry currently has limited depth compared to global leaders. Without significant investment in R&D centres and engineering talent pipelines, Indian manufacturers risk remaining assemblers rather than technology originators. The gap between assembly-led manufacturing and IP-driven product development limits long-term export competitiveness and margin potential.