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Make in India: Mobile manufacturing scenario

July 19, 2018
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By Goutam Jain, co- founder, M-tech Informatics

India maintained its position as the fastest growing smartphone market in the world in 2018 with double digit growth, as per an IDC report.  However, the industry is plagued by many issues and a lot still needs to be done if India were to emerge as a mobile phone manufacturing hub.

First, on the policy front, an issue that needs immediate attention by the government is the misuse of FTA with Association of Southeast Asian Nations (ASEAN) countries in the form of duty evasion by some players, who are importing completely built units (CBU)s at zero customs duty. This will adversely impact both the government and domestic brands in terms of revenue loss and unfair pricing, respectively.

Second, the budget 2018 hiked the import duty on critical phone components like printed circuit boards (PCBs), camera, sensors, etc by 10 per cent. However, most manufacturers still need to import these components due to the absence of a domestic component manufacturing eco- system. This has already led to spike in prices of mobile phones which has to be absorbed by the manufacturers, further eroding margins.  Additionally, though the move by government to hike import duty on CBU’s to 20 per cent is well intentioned, the fact that currently about 80 per cent-90 per cent components are taxed (which were earlier nil), make the pricing differential between CBU’s and domestic manufactured phones negligible, thereby rendering the budget move ineffective. Therefore, the government needs to roll back the hike on components and further hike import duty on CBU’s to discourage imports and boost domestic production.

Third, a recent development that has adversely affected the industry is the steep three fold rise in Bureau of Indian Standards (BIS)  fee for testing and compliance, without any valid reason. This is not including other tests like BIS language testing, Specific Absorption Rate (SAR) and Restriction of Hazardous Substances (ROHS) which all put together dent manufacturer margins. We urge the government to come up with a slab based formula and categorise manufacturers as per sales volume or value, which we feel is a fairer way to assess small, medium and large players and provide a level playing field.

India is set to emerge as the largest mobile manufacturer in the world in the next few years. From two manufacturing units in 2014  to 120 currently, the size of the domestic mobile manufacturing industry was Rs 940 billion in 2016-17 , employing over 150,000 direct workers  and  contributing 1.75 per cent to India’s gross domestic product (GDP),  thereby  generating large revenues for government through indirect and direct taxes.  On a concluding note, I would like to add that with a potential to generate 800,000 jobs and contribute 8 per cent to the GDP by 2020, the industry requires all possible support from the government to accelerate the momentum which leads to mass employment generation and success of the Make in India program.

 

 
 
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