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"It is estimated that India suffers from various disabilities like high cost of power, tax and ease of doing business. This renders India almost 10 per cent and 20 per cent less competitive than Vietnam and China, respectively. India must address these disability issues in the long run," a strategy document by ICEA-EY said.
PTI|Last Updated: Jun 11, 2020, 06.05 PM IST0Comments Getty Images
New Delhi: India has an unprecedented opportunity to establish itself as an alternative destination for mobile phone manufacturing and become an export hub as global giants look at de-risking manufacturing from China in the post-COVID-19 era, a strategy document by ICEA-EY said on Thursday. The document, which has been shared with government authorities, has outlined a three-phase 'Restart, Restore and Resurgence' strategy to help India achieve exports of USD 100 billion in mobile phones and nearly US 40 billion in components by 2025.
The document said India appears to have all necessary ingredients to encourage mobile manufacturing at scale and boost exports from the country but what appears to be missing is the policy support to attract lead firms, incentivise production and unveil measures that provide cost competitiveness to industry or help offset the disabilities suffered by Indian firms vis-a-vis Vietnam and China.
It is estimated that India suffers from various disabilities like high cost of power, tax and ease of doing business. This renders India almost 10 per cent and 20 per cent less competitive than Vietnam and China, respectively. India must address these disability issues in the long run, it added.
In the short run, the government should endeavour to offset these disabilities by providing incentives which are WTO-compliant, easy to implement and help India take off from the export runway, it said.
India spent USD 18.7 billion on import of mobile phones and parts, compared to exports of USD 2.0 billion of mobile phones and parts.
India Cellular and Electronics Association (ICEA) Chairman Pankaj Mohindroo lauded the government's push to mobile phone manufacturing through production-linked incentive (PLI) scheme, Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme.
"The recently announced trilogy of schemes — PLI, SPECS and EMC 2.0 — have laid the foundation for starting something big. The impact of the PLI scheme will be visible before the end of 2020-21," he said.
The document noted that five companies (Samsung, Apple, Huawei, Oppo and Vivo), which account for over 80 per cent of the mobile phone revenues, globally are already present in India. While they have started assembly in India to primarily serve the domestic market, assembling of mobile phones continues to be centred in China (including Hong Kong) and Vietnam.
"However, these brands are keen and capable to provide India with global market access. Some of these global brands have begun smartphone exports from India since 2018. They await policy certainty to increase global supply from India," the document said.
The spread of COVID-19 and the subsequent lockdown of countries saw supply chains being disrupted, which has forced global firms to de-risk manufacturing out of China and diversify across multiple countries, as against reliance on a single source of production and procurement. Furthermore, the recent trade dispute between the US and China gave India an opportunity to plug itself as the third mobile phone assembler in the world (apart from China and Vietnam).
"The post-COVID-19 era might thus present India an unprecedented opportunity to establish itself as an alternative destination for manufacturing to follow on the path of becoming a net exporter," it said adding that India needs to move "purposefully" and approach companies and supply chains in a targeted manner and address their particular concerns with alacrity.
Hari Om Rai, chairman and MD of Lava International, said homegrown companies need support in two areas to be able to capture a larger chunk of the market.
"One is skill building, in terms of design, supply chain and manufacturing. And second is ability to access the markets of the world. I think these two areas, if we can get support, eventually we will be global champions and global champions from India are going to emerge," he said.
The document suggested that from May to July 2020, focus may be kept on restarting operations and reaching 100 per cent capacity, and then till November, the country should aim to restore complete normalcy including supply chain, employee workforce, input imports, and normalise operations for both domestic supplies as well as export markets.
In the period from December 2020 to 2025, India needs to chart its path towards becoming a leading exporter of mobile phones in the world, while pushing mobile exports as a top ranking Indian export from where it currently stands, it added.
"Today, India stands at the cusp of a great opportunity to ignite the mobile phone manufacturing, bring global value chain investors in India, and become leading exporters of mobile phones in the world," EY India Indirect Tax Partner Telecom sector Bipin Sapra said.
Sapra added that the introduction of the incentive schemes such as PLI, SPECS and EMC will bring resurgence in the manufacturing environment and create a competitive global ecosystem for India to capture the global market share of mobile phones, parts and accessories. Read more onrestart, restore and resurgenceApple Inc.phone exportmobile phone manufacturingPhone export hubOppoIndia Cellular and Electronics Associationmodified electronics manufacturing clusters
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