Mobile phone production in India jumped from ₹18,900 crore in 2014-15 to an estimated ₹4,10,000 crore in FY24, a report by ICEA said. File
| Photo Credit: Reuters

Mobile phone manufacturing in value terms jumped 21-fold to ₹4.1 lakh crore in India in the last 10 years as government policy measures like the PLI scheme played a critical role in attracting global players to boost local production, industry body India Cellular and Electronics Association (ICEA) said in a statement.

India now produces 97% of its total mobile phone demand locally and 30% of the total production in the financial year 2024 is meant for export, it said.

“Mobile phone production surged from ₹18,900 crore in 2014-15 to an estimated ₹4,10,000 crore in FY24, registering an increase of 2,000%. In 2014-15, mobile phone exports from India were a mere ₹1,556 crore. The industry expects to end FY24 with an estimated export ₹Rs 1,20,000 crore. This would mean a 7,500% increase in exports over a decade,” ICEA said.

According to a note on manufacturing, in the field of smartphones, Apple and Samsung, have played a crucial role in boosting mobile phone exports from the country.

Devices manufactured in India are exported to the United Kingdom, the Netherlands, Austria, and Italy, the note said, adding that these devices were exported to West Asia, North Africa and South American markets.

“30% of production in FY24 will now be meant for exports. The industry expects to end FY24 with an estimated export of ₹1.2 lakh crore. Driven by this export growth, mobile phones have now become India’s fifth largest export as an individual commodity,” the industry body said.

Promoting domestic manufacturing

In May 2017, the Indian government announced the Phased Manufacturing Programme (PMP) to promote the domestic production of mobile handsets. This initiative helped build a robust indigenous mobile manufacturing ecosystem in India and incentivized large-scale manufacturing. From just two mobile phone factories in 2014, India now has become the second-largest mobile phone producer in the world.

Also read: Pushing India to surpass China in mobile manufacturing: Ravi Shankar Prasad

The Production Linked Incentive scheme for Large-Scale Electronics Manufacturing (LSEM) and for IT hardware has played an instrumental role in making India a competitive destination for electronics manufacturing.

The PLI scheme offers incentives ranging from 3-5% of the incremental sales value for a stipulated period to eligible players. It has attracted leading global contract manufacturers, including Foxconn, Pegatron, Rising Star and Wistron to set up a production base in India. Samsung on the other hand, operates its second-largest mobile phone factory in Noida.

“This exponential growth in production, exports and self-sufficiency stems from a conducive policy environment, and a close working relationship between industry and key Government Ministries such as the Ministry of Electronics and IT, DPIIT, Ministry of Commerce, Ministry of Finance, NITI Aayog and the PMO,” ICEA said.

Image used for representative purpose only.
| Photo Credit: K.V.S. Giri

India has the highest tariffs on inputs in electronic segment among competing economies such as Vietnam and Thailand, ICEA said on July 6 citing its latest study as the industry body made a strong pitch for reduction in tariffs.

The high tariffs impact competitiveness, ICEA said, adding that the industry is seeking reduction of tariffs, and glide path to match Vietnam and other competing nations.

Also Read | Electronics industry urges cut in import tariffs

The study revealed that high tariff-induced costs accentuates India’s cost disability vis-à-vis the four competing economies.

India Cellular and Electronics Association (ICEA) said the study is critical to evaluate India’s competitiveness to reach the $300-billion electronics production goal by 2025-26, including $120 billion of exports.

A line-by-line comparison of India’s non-zero tariffs shows that India’s tariffs are higher for up to 98% lines compared to Vietnam (for FTA tariffs) and 90% of the lines compared to Thailand.

The competing economies have nearly double or more zero-tariff lines than India, according to the study released by ICEA at a conference.

ICEA, India’s apex electronics industry association, conducted the five-nation study of input tariffs in electronics sector across India, China, Vietnam, Thailand and Mexico, covering 120 key components.

“…our recommendation is that we should begin decompression exercise starting 2023. Relevant FTAs will take time, targeted tariff reduction is the immediate solution,” Pankaj Mohindroo, Chairman at ICEA, said during a briefing.

ICEA study mentioned that over 80% of Vietnam’s imports for 120 tariff lines are under free trade agreements (FTAs). The average tariff in Vietnam (considering their FTA imports) is much lower — close to 1%.

Also Read | ‘India can make $300-bn electronics by 2026’

The study also claimed that instead of building a domestic ecosystem, high import duties perpetuate imports as it results in uncompetitiveness of the domestic ecosystem.

“Tariffs act in the reverse direction to their intended purpose by adversely impacting costs, growing domestic production and exports. High tariffs only work in an import substitution phase, not when a sector like electronics has entered the phase of export-led growth,” ICEA release said.

India’s mobile phone exports increased nearly 100% to $11.1 billion, and electronics exports by about 56% to $23.6 billion by March 2023.

The study shows that between 2015 and 2021, while India’s electronics tariffs rose, those of the competing economies decreased.

India and Mexico have trade deficits, while China, Thailand and Vietnam have moved to an overall trade surplus.

Despite lower tariffs in 2022 and while tariffs continually decreased during 2015 to 2021, each of the four competing economies performed better than India in exports, trade deficit and surplus for electronics.