Towards a production hub

Think Electronics, Think India, was the accompanying hashtag in Union Minister Ravi Shankar Prasad's emphatic announcement of India becoming the second-largest mobile phone manufacturer in the world. Prasad attributed the success to the setting up of more than 200 mobile phone manufacturing units and as many as 330 million handsets produced in a single financial year (2019). Indeed, these statistics depict a healthy and rising trajectory for the mobile phone manufacturing industry, which also subtly underlines India's ambition to become a manufacturing hub. The consolidated rise in these past five years indicates that the sector has potential which should not be squandered, especially since India appears adamant to offer itself as a vigorous global alternative to China in the manufacturing sector. As it would happen, the time appears ripe for this leap since the global markets appear keen to relocate in the wake of the pandemic. In fact, the major transition in mobile phone manufacturing segment achieved under the first Modi administration resulted in the National Policy on Electronics (NPE 2019) laying down the strategy for further growth. The vision of the policy envisages "to position India as a global hub for Electronics System Design and Manufacturing (ESDM) by encouraging and driving capabilities in the country for developing core components, including chipsets, and creating an enabling environment for the industry to compete globally". Under the vision, the policy highlights various objectives such as achieving production of a billion handsets by 2025, improving the ease of doing business, providing fiscal incentives for export-led growth, et al. Union Minister's announcement of electronics incentive scheme kickstarts the journey to complete the mentioned objectives of the policy. The three schemes — Production Linked Incentive, Component Manufacturing Scheme and Modified Electronics Manufacturing Clusters — with a total outlay of Rs 48,000 crore are set to provide impetus to the large-scale manufacturing of electronics which also reinforces our competitiveness in the sector vis-à-vis to the current leader, China. Through the launch of these schemes, India appears to be laying the groundwork for companies to establish their manufacturing arms. The Production Linked Incentive (PLI) is likely to attract companies such as Foxconn, Flex, Samsung, Oppo, Wistron, Vivo, etc., to set up production facilities in India. While global companies have been engaged in the assemblage of imported components in the country, these would now find it suitable to manufacture those. While attracting foreign giants, the focus has also been shown on raising their home-grown counterparts such as Lava, Karbonn, Micromax, Intex, etc. This will ensure that PM's call for promoting indigenous capacity is not a hollow one. Collectively, the set targets would then have a bearing on India's net exports — a key component in GDP growth that India should strive to raise. The incentive schemes are set to give the much-needed boost to the sector but given the demographic map of our country, they also bring along a positive externality i.e., jobs. The government is of the opinion that additional business due to being generated from a conducive environment provided to companies is bound to bring around 10 lakh jobs in future. Unemployment, undoubtedly, remains one of the glaring issues of the country, further exacerbated by the coronavirus. Though short-term remedies are desperately needed, one cannot discard the long-term measures which would bring fruitful outcomes. The stress, again, is on immediate remedies nevertheless in this aspect. But here the argument is on the positive impact of becoming a manufacturing hub in the mobile phone sector. There is something that the government, in its pursuit of the NPE 2019 vision, needs to consider for an overall enrichment in its aspired value addition to this sector. To excel in its manufacturing hub dream, India must extensively pursue a production subsidy for its home-grown companies. Labour reforms and measures to promote ease of doing business along with incentivising schemes and production subsidy can produce a positive impact on India's vision of becoming a thriving manufacturing hub.