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India may offer new incentives to woo smartphone manufactures in 2020

An Indian policy think tank is making plans to build a USD 110-billion mobile phone export business in the country.

credit: DFIC

India is planning to offer more incentives to smartphone manufacturers to achieve its ambitious target of upping its mobile device exports from the current USD 3 billion to a whopping USD 110 billion by 2025.

This is in line with the Indian government’s five-year-old flagship initiative ‘Make In India’, which seeks to make the country an electronics manufacturing hub for overseas companies.

In July, India had put together a high-level committee under Amitabh Kant, the CEO of NITI Aayog, a policy think tank, to draw up the plan for building a USD 110-billion mobile phone export business in the country. India wants to lure big-ticket investments away from China and Vietnam—the two markets that offer better benefits than India.

According to the local media Economic Times, the government is mulling over offering 6% duty credit scrips, replacing the current 4% scrip. A duty scrip is a certificate with certain monetary value that can be used to pay customs duty, excise duty, and service tax.

“The industry had sought up to 8% (duty credit slip) but the government is considering a 6% replacement for the MEIS (Merchandise Exports from India Scheme),” ET quoted a senior government official.

However, there is a catch. Another official told ET, the government is tightening the eligibility criteria and that the new scheme may only be offered to those manufacturers who develop their supply chain and ecosystem in India and make the country an export hub.

“The criterion being deliberated on include employment generated, the investment made, average selling price of phones, and production,” the report said quoting the official anonymously. “Since it (the new scheme) has to be WTO (World Trade Organisation) compliant, the policy cannot directly provide subsidy for exports and that criterion is being narrowed down.”

Kant’s high-level committee is working on the above-mentioned criteria.

This comes at a time when India is contesting the World Trade Organization’s (WTO) October ruling against the country’s export subsidies, including MEIS. India said it’s consistent with provisions of global trade norms, which WTO didn’t agree with and gave the South Asian nation 90 to 180 days to withdraw these schemes.

A month after the ruling, the government issued a notification saying it would cut down the additional 2% export benefit that it had announced in August.

Additionally, the new export incentive scheme that is supposed to replace MEIS by the beginning of 2020 hasn’t been approved by the Indian government yet, making global smartphone manufacturers anxious. With the new internal discussions reported by the media, India seems to be willing to take extra measures to mollify the concerns of manufacturing giants like Apple, Samsung, Oppo, Vivo, and OnePlus.

As of now, these companies have announced their plans to assemble products in India and export them to other markets.

Last quarter, Apple started making its latest phones including iPhone XR and said the devices manufactured in India will be used to export as well as for the domestic market. Oppo is looking to manufacture 100 million smartphone units locally by the end of 2020, and use India as its export base for South Asia, Middle East, and African countries. Its sister company Vivo is exploring exports from its new manufacturing unit in Greater Noida under the first phase of its INR 7,500 crore (USD 105 million) investment planned for India. OnePlus has also recently started exporting smartphones made in India to the US and may convert the country into its manufacturing hub.