NEW DELHI: India needs to relook at the phased manufacturing program (PMP) and focus on an export-oriented strategy where local production of components is incentivised rather than taking the protectionist route by levying high duties on imports, said Internet and Mobile Association of India (IAMAI).
“While India did succeed in attracting some companies to begin assembling phones here, the larger ecosystem comprising the vendors and suppliers of high value components and assemblies did not shift to India,” IAMAI said in the report showcased by Niti Aayog chairman Amitabh Kant Thursday.
“The net result was that while India managed to reduce the imports of fully built mobile phones, it continues to incur forex outflow on account of imports of mobile phone components and assemblies,” the report added.
The report suggested that the government should reconsider the implementation of the duty regime under PMP including future duties on high value components like PCBA, camera modules, display and touch panels. Also, manufacturing should be done to cater to exports, and not just the local demand.
The association said in a report that mobile phones make up the bulk of electronics system design and manufacturing (ESDM) segment at 27% presently, and will continue to dominate at 30% of the total market, but in order to gain a foothold in the global phone manufacturing market worth $467 billion the country must look at high value addition manufacturing, instead of plain assembly. The size of the ESDM sector of India was pegged at USD 61.8 billion in 2015. The sector is expected to grow at a CAGR of 15-19 percent to reach USD 123-150 billion by 2020.
The association further suggested that the country should attract large manufacturers that are willing to invest in higher-end production, which can ensure that India is able to effectively diversify to international markets and sell to middle-income and advanced markets.
“It is essential that India improves ease of doing business, and rationalizes FDI rules wherever required, in consonance with an ecosystem approach in order to attract large brands to invest locally,” the report said, adding that selling higher-end phones will help India achieve its 2025 export target of USD 110 billion in mobile exports.
Government must provide both production-based incentives as well as export-oriented incentives to encourage Indian domestic manufacturing, the report suggested and that it should reinstate the benefit of M-SIPS which served as an added attraction for large companies to invest in India.
Under the Merchandise Export Incentive Scheme (MEIS), which has come under World Trade Organisation’s (WTO) scanner, incentives for low-value components like battery, chargers should at the very least be raised to 4% from the existing 2%, similar to that being offered to mobile exports.
courtesy by : economictimes.indiatimes