Minister seeks views from mobile firms on boosting investments

Policies that will boost telecom and electronics manufacturing in India are high on Communications and IT Minister Ravi Shankar Prasad’s first 100 days’ agenda.

While Kapil Sibal, who held the portfolio under the UPA dispensation, had also taken this as one of the key initiatives, proposals such as the preferential manufacturing access did not take off due to differences within the Government on implementing it.

According to top Government functionaries, Prasad now wants to take a fresh look at the issue and has asked the industry to come up with ideas on how local manufacturing can be made a reality. “The Minister met multinational mobile phone companies recently and asked them to give a list of things which the new Government can do to encourage them to set up factories in India,” the Government official told Business Line.

The previous Government had tried to bring in a number of policies to attract investments in the manufacturing sector. For example, it had announced incentive schemes for players for setting up semiconductor fabrication units.

However, these initiatives did not attract many new investors. In fact, decisions such as the tax notice on Nokia acted as a dampener. Nokia had to shift most of its manufacturing from the Sriperumbudur factory near Chennai to locations in other countries, including Vietnam.

When contacted, a Nokia spokesperson confirmed the meeting with Prasad. “Nokia confirms that it has started to meet high-level ministers of the new government. We welcome the opportunity to engage with the new government on matters important to the industry. We remain committed to getting the asset freeze on the Chennai facility lifted and to find an amicable resolution to the current tax disputes.”

The big worry for the Government is that India is a net importer of electronic products, which impacts the foreign exchange situation.

China factor

According to the Indian Cellular Association, imports of mobile phones are estimated to increase by whopping 61 per cent in 2014 to ₹56,300 crore compared with ₹34,950 crore in 2013. Total domestic production would have shrunk by nearly 15 per cent, at a time when the overall market is set to grow by 31.5 per cent. This, despite the fact that manufacturing in India is cheaper compared with China. Labour costs here are half the level of Shenzhen, the global hub of mobile manufacturing. But, China has rolled out the red carpet by giving huge tax breaks backed by investment friendly policies.

The key challenge for Prasad to counter China’s superiority in the region would be to get support from other Ministries such as Finance to give tax incentives and infrastructure support to make India an attractive destination.

(This article was published on June 8, 2014)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.