What Make-in-India? PDF Print E-mail
Tuesday, 22 November 2016 00:56
AddThis Social Bookmark Button

Just 6% of value of phones assembled here is local


That India today produces 180 million mobile phones, after a dramatic fall from 170 million in 2012 to a mere 50 million in 2014 after the Nokia plant shut, looks like a testimony to how well the Make-in-India programme is doing. As a result, close to two out of every three phones sold in India are made here. Indeed, from a handful of units in 2014, there are around 50 units, over 13 states, involved in either making components or assembling mobile phones. The fact that only Rs 1,700 crore has been invested in setting up these units, however, puts a different perspective to things. According to a research report by IIM Bangalore and Counterpoint Researchers, while the 180 million phones were worth $9 billion, just around $650 million was sourced from India. Should things carry on unchanged, while the study expects 96% of phones sold in the country by 2020 to be made-in-India, the balance of payments will continue to be under strain since most of the components will continue to be imported. In such a situation, the number of jobs that will be created will be low, as will be the salaries they command.


Higher value addition in India is the way to go, and a lesson can be drawn from the 2015 budget, where finance minister Arun Jaitley increased the countervailing duty (CVD) on imported phones to 12.5% while retaining a 1% excise duty on locally manufactured phones. While this gave a fillip to setting up assembly plants, all of them imported SKD kits and simply screwed them together with little value addition. What the IIM-Bangalore and Counterpoint study does is to examine each component of the bill of materials (BoM) of a mobile phone and to study the feasibility of greater value addition in each. So, it concludes, a good place to begin while looking for greater value addition is batteries/chargers/headphones/packaging – this adds up to around a tenth of the BoM and is relatively lower in technology; by 2020, the study reckons India can look at a 67% value addition in battery/charger, 79% in the front and back covers of the phone but just 7% in the PCB which comprises around half the BoM of a phone. Based on this component-by-component analysis, the report estimates India can source another $16 billion of value-added components over the next five years, taking local sourcing levels up to around a third by then – if this happens, the number of direct jobs created will rise threefold in the next five years to 150,000 and the number of indirect ones to 1 million; annual wages by then will rise to $1.8 billion, up from a mere $125 million right now. While the report is silent on how to achieve the value addition it projects, what will be required is big excise incentives – while a 2015 kind of incentive is not possible under GST, the government will have to work on refunding duties based on different levels of value addition. Without that Make-in-India will remain pretty much a farce as far as mobile phones are concerned.  


You are here  : Home Telecom What Make-in-India?