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Authors

Dikshu C. Kukreja
Dikshu C. Kukreja
Mr. V. Raman Kumar
Mr. V. Raman Kumar
Ms. Chandra Ganjoo
Ms. Chandra Ganjoo
Sanjay Bhatia
Sanjay Bhatia
Aprameya Radhakrishna
Aprameya Radhakrishna
Colin Shah
Colin Shah
Shri P.R. Aqeel Ahmed
Shri P.R. Aqeel Ahmed
Dr. Vidya Yeravdekar
Dr. Vidya Yeravdekar
Alok Kirloskar
Alok Kirloskar
Pragati Khare
Pragati Khare
Devang Mody
Devang Mody
Vinay Kalantri
Vinay Kalantri

EXPORT OF MOBILE PHONES FROM INDIA: OVER 100% GROWTH IN FY20

EXPORT OF MOBILE PHONES FROM INDIA: OVER 100% GROWTH IN FY20

Smartphones market in India have witnessed a phenomenal growth in the past few years. India overtook the United States (US) to become the second-largest smartphone market globally, reaching 58 million shipments in 2019 with a 7 per cent y-o-y growth on the back of development in technology along with increased internet penetration. In 2019, India had nearly 502 million smartphone users, accounting for almost 77 per cent of Indians having access to internet. Smartphone users are expected to reach 780 million in 2021.

The target is to produce mobile phones worth US$ 24 billion by 2020 and US$ 190 billion by 2025.

India exported 36 million units of smartphone in FY20 compared to 17 million units exported in FY19. In terms of value, the y-o-y growth in exports was 91 per cent with India exporting devices worth Rs 21,000 crore (US$ 2.98 billion) during FY20. In FY20, there was also a decrease in imports by 81 per cent to 2 million units from 26 million units in the previous fiscal year.

India’s contribution to the global smartphone market increased from 9 per cent in 2016 to 16 per cent in 2019.

Aside from retailing, the manufacturing sector has also seen growth. The two major flagship schemes, Make in India and the Merchandise Export Incentive Scheme (MEIS), have helped in the growth of this industry.

Under the Make in India scheme, the government provided incentives to boost manufacturing of mobile phones and their components in the country. Earlier, mobile phones were not manufactured end-to-end in India and most of the mobile phone manufacturers would assemble smartphones and feature phones in the country. With the introduction of Make in India scheme, the focus shifted from assembling to manufacturing. Local production increased, covering the local demand as well as increasing export from the county.

Xiaomi, the market leader in the country in 2019, started manufacturing at its two facilities – one at the Sri City Special Economic Zone (SEZ) in Andhra Pradesh and the other at Sriperumbudur in Tamil Nadu. Almost all the phones sold by the company in India are manufactured within the country. It also exports phones made in India to Bangladesh and Nepal.

In 2018, Samsung started manufacturing mobile phones in its world’s largest mobile phone factory in Noida, having the capacity to produce 12 crore mobile phones every year, ranging from lower-end smartphones to the flagship Samsung Galaxy S9 series, generating 15,000 local jobs. In January 2020, the company announced an investment of US$ 500 million to set up a manufacturing plant in India to manufacture smartphone displays in line with the Ministry of Electronics and Information Technology’s strategy to increase in-house production of smartphones.

In August 2019, OnePlus invested Rs 1,000 crore (US$ 141.86 million) in a new research and development (R&D) centre in Hyderabad. It also expanded its Noida plant to export its latest models to the US and the European Union markets from India.

Currently, India has around 270 factories making handsets and components. In order to attract suppliers of foreign companies like Apple Inc and Samsung Electronics to open more factories in India, the government has extended their support in the form of subsidised loans to these mobile handset manufacturers.

Merchandise Export Incentive Scheme (MEIS) was introduced through Foreign Trade Policy (FTP) 2015-20, effective from April 1, 2015. The aim of the policy was to promote the export of notified goods manufactured in India. The government offers duty benefits of up to 4 per cent depending on exported product and the country to which it is exported. Rewards under the scheme are payable as percentage of realized free-on-board value and MEIS duty credit scrip can be transferred to the company for working capital needs or can be used for payment of various duties such as basic customs duty. This incentive will be increased to between 4 per cent and 6 per cent, applicable from August 1 this year, under the new production-linked incentive, which has a budgetary outlay of Rs 41,000 crore (US$ 5.82 billion) according to the government.

Under Union Budget 2020-21, the government proposed to introduce a policy to encourage the manufacturing of electronics and semiconductors in India. This policy is also expected to support the development of Electric Vehicles (EV) ecosystem and supply chain.

In February 2020, the government announced the creation of Rs 45,000 crore (US$ 6.38 billion) fund to boost electronic manufacturing in the country. This is to ensure that big firms such as Apple, Samsung, Huawei, Oppo, and Vivo, in addition to contract manufacturers like Foxconn and Wistron, bring their global supply chains to India and make the country an electronics manufacturing hub in the next five years.

Around Rs 41,000 crore (US$ 5.82 billion) out of the total fund would be disbursed to companies based on production-linked incentive (PLI) criteria, while the remaining Rs 4,000 crore (US$ 567.46 million) will be provided under a proposed capital subsidy or reimbursement scheme. This is almost in sync with World Trade Organization guidelines and the support is not directly linked to exports.

The corporate tax relief and improvement in the ease of doing business besides the Make in India initiative has provided the impetus to mobile exports from the county. Still, certification issues and low rate of duty drawbacks are among the issues that continue to hinder exports of ‘Make in India’ products to other countries. Bureau of Indian Standards (BIS) certificate is not allowed in many parts of the world, making it difficult for exporters to export their products.

For the mobile handset segment alone, the government under the National Policy on Electronics 2019 has set a target of making 100 crore mobile handsets indigenously by 2025 with a value of around Rs 13 lakh crore (US$ 184.42 billion). The large-scale facility will not only benefit the brands but also the Indian customers in the form of more affordable products.

The government has set an ambitious target to increase smartphone exports to US$ 110 billion by 2025 from US$ 3 billion now and will look to become a net exporter of electronics goods.

 

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