India’s smartphone exports rise from 1% to 2.5% in a decade
- February 22, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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India’s smartphone exports rise from 1% to 2.5% in a decade
Subject: Economy
Section: External Sector
Context:
- In recent times, India has laid much emphasis on smartphone exports. In FY 2023, Prime Minister Narendra Modi lauded phone exports as they crossed the $10 billion mark.
Smartphone export from India
- India is one of the leading players when it comes to cell phone exports by country.
- The country aims to accomplish the production of electronics worth US$ 300 billion by FY 2026; manufacturing mobile phones will be the key to achieving India’s ambitious goal.
- India’s electronic goods exports surged by approximately 88% from US$ 6,600 million in FY 2013-14 to US$ 12,400 million in FY 2021-22.
- Mobile phones, consumer electronics, IT hardware, auto electronics, and industrial electronics were the key products exported from India.
Steps taken by India to promote smartphone exports:
- Production-Linked Incentive (PLI) Scheme: The government has launched the PLI scheme to provide financial incentives to smartphone manufacturers to boost local production and exports.
- Phased Manufacturing Program (PMP): The PMP program promotes domestic value addition in mobile phones and their sub-assemblies/parts manufacturing.
- Foreign Direct Investment (FDI): The government has permitted 100% FDI under the automatic route for manufacturing electronic devices (excluding countries sharing land borders with India). This has helped attract foreign investment in the electronics manufacturing sector.
- Incentivized Areas for Export-Oriented Units: Special Economic Zones (SEZs) have been set up across the country to facilitate export-oriented manufacturing and trading. Units for manufacturing and related services set up under the Electronic Hardware Technology Park (EHTP) scheme are major contributors to India’s electronics exports
- Design Linked Incentive (DLI) Scheme: The DLI scheme offers financial incentives and design infrastructure support across various stages of development and deployment of chipsets, systems & IP cores, and semiconductor-linked design. The scheme provides both a “Product Design Linked Incentive” and a “Deployment Linked Incentive”.
Challenges to India’s Smartphone Export Ambitions:
- Disparity in Export Percentages: The lower taxes in China and Vietnam helped boost their exports. Exports accounted for only 25% of India’s smartphone production in 2023, compared with 63% of China’s $270 billion worth of production and 95% of Vietnam’s $40 billion worth.
- Limited Tax Reductions on Components: The finance ministry lowered taxes on some components, including battery covers, to 10% from 15%, but did not agree to many other tariff cut requests.
- High Tariffs on Specific Components: India still imposes a 20% tax on parts including chargers, some circuit boards, and fully assembled phones.
- Tariff Discrepancies: The lawmakers and lobby groups for Apple and other firms argue India’s high tariffs are a deterrent for companies de-risking their supply chains beyond China, and nations such as Vietnam, Thailand, and Mexico have raced ahead in phone exports by offering lower tariffs on components.
- Elevated Production Costs: India has high production costs as we have one of the highest tariffs among the key manufacturing destinations.
- Supply chain limitations: Made in India phones use many parts made locally, but companies import many high-end parts from China and elsewhere due to supply chain limitations.