Budget 2018 will highlight the ‘Make in India’ programme alongside the ‘Digital India’ programme. The view within the industry, however, is that there is a tough balance that FM Arun Jaitley will have to strike in his plans to encourage local manufacturing in India.
Budget 2018: As the nation awaits what Finance Minister Arun Jaitley’s suitcase will unwrap during the Budget 2018 announcement in parliament on Thursday, February 1, the mobile industry is hoping for some relief through tax concessions and other bounties in order to expand its foothold in the country. Industry experts believe that FM Jaitley could give a boost to the government’s ‘Digital India’ and ‘Make in India’ initiatives during the Budget 2018, which in turn could levy overloads on the mobile phone industry in India in the form of a hike in customs duty.
The government’s ‘Digital India’ programme has so far garnered impressive results leading to the higher adoption of electronic items such as mobile phones in the country. While the government focuses on facilitating better delivery of governance through the adoption of technology under the ‘Digital India’ programme, there are roadblocks that the industry sees in the way. Though mobile phones are headed for sale at rock-bottom prices, there is a large population that is still deprived of the technology. During the Budget 2018, the government must address this chunk of the population by giving out more sops to domestic manufacturers to enable a higher level of digitisation in India, believe experts. The manufacturers of these electronic items, who were left high and dry the last time around, are hoping that the government would turn to them to provide some concessions and rebates this time around to help them boost manufacturing. Moreover, with the ‘Make in India’ programme set to be another key highlight of Budget 2018 like the ‘Digital India’ programme, the view within the industry is that there is a tough balance that FM Jaitley will have to maintain in his plans to encourage local manufacturing in India.
The industry hopes that the government’s push towards digitisation does not leave them short-changed. For, experts are not negating the possibility of a fresh hike in customs duty that could impact electronic components such as printed circuit boards (PCBs), camera modules, and mobile displays, which currently invite no import duty. The government’s thinking behind levying additional customs duty on imported parts is seen as a move to encourage phone makers to concentrate on making them in India instead of importing them. In December last year, the government hiked customs duty on imported parts to 15 percent, up from 10 percent that was imposed in July last year. This move squarely impacted the prices of the smartphones in the country after the GST implementation, which took all the levies out of government’s hands except customs duty.
“We’re moving into the next phase of manufacturing programme, going forward for the next components like PCBs, where government will be looking forward to increasing the duty on certain components – high-level components – so that their [government’s manufacturing] ecosystem starts happening here in India”, said Tarun Pathak, Associate Director at Counterpoint Technology Market Research.
This could deal another blow to Indian phone makers who have expressed their discontent over this move and are expecting things to get better during this year’s Budget 2018. In addition to sops in the form of a reduction in duty on imported components, phone manufacturers are hoping for a better ecosystem that will favour manufacturing in India. “The government will need to bring in some anchoring industry and rather than targeting all the other companies, the government should target one or two or three main companies, for example, Apple in this case. If a big [anchor] company comes into picture then the supporting manufacturing plants [also] come into the picture,” said Pathak.
The mobile phone manufacturing industry in India mainly comprises of the companies and vendors that assemble electronic components in India, rather than manufacturing them. This is primarily due to the lack of a suitable ecosystem and skilled manpower. These components are mostly manufactured in China and then imported in India to be assembled into a phone, throwing a setback to PM Narendra Modi’s ‘Make in India’ programme. Pathak believes that government should look into areas including the Surface Mount Technology (SMT) where the duties should be reduced to favour local manufacturing. “Instead of bringing all the SKDs from China. We [should] start assembling those components also here in India on an advanced level at some design companies, from Make in India to ‘Design in India’ basically,” he added.