Info-tech

Thanks to PLI scheme, mobile phone exports surge 250%

Ayushi Kar Mumbai | Updated on August 25, 2021

The Finance Minister has extended the PLI scheme for large-scale electronics manufacturing with a focus on mobile phones by a year until 2025-26   -  Bloomberg

But lack of value addition keeps overall electronic trade deficit high

24The export of mobile phones from India grew by a massive 250 per cent year-on-year in the April-June quarter of FY22, thanks to the production-linked incentive (PLI) scheme.

According to data released by the India Cellular and Electronics Association, mobile exports in the June quarter of FY22 climbed to ₹4,600 crore, a 250 per cent jump from ₹1,300 crore in the June quarter of the previous year.

Decline in import

There was also a sharp decline in the import of mobile phones at ₹600 crore during the first quarter, while it was as high as ₹3,100 crore during the same period in FY21.

A hub for phones

Mobile PLI was formulated to reduce India’s electronic trade deficit by making the country a manufacturing hub for mobile phones.

However, according to experts, manufacturing capabilities with a significant value-add have not been established in the country yet, which is why despite a year after the passing of the PLI scheme the dent on trade deficit is minimal.

According to Pareekh Jain, CEO of EIIRTrend, India’s manufacturing capabilities account for a 20 per cent value add in mobile phones, with the remaining 80 per cent being imported in the form of components and then assembled in the country. This means that the mobile phone is already 80 per cent made by the time Indian manufacturers commence working on it.

As a result of low value addition happening, India reported an electronics trade deficit upwards of $41 billion in 2020-21.

Faisal Kawoosa, founder of market research and analytics firm Techarc, explained: “The policies and measures we have taken are not fundamentally building the ecosystem for mobile manufacturing. The fundamental aim of any policy should have been to increase value-addition in mobile manufacturing which is not happening. So, the complete build unit – complete units imported from abroad has gone down – given that most of the phones are assembled in India,” Kawoosa explained. This means instead of importing a ₹100 phone, India imports ₹100 worth of components. This is due to the rise in component prices last year as well,” Kawoosa explained.

Navkendar Singh, Technology Industry Analyst at IDC India, also believes the pandemic is to blame for the lacklustre performance. “The pandemic put the companies’ expansion capabilities on hold, which has delayed plans to establish manufacturing units for components for a year or so. PLI scheme will take some time to take hold; however, given that India remains one of the largest markets for smartphones – which is likely to continue growing for the next decade or so – it is likely the ecosystem will set itself up in the coming years.”

Pankaj Mohindroo, Chairman of India Cellular and Electronics Association, told BusinessLine: “Green shoots notwithstanding we have a long way to go to reach $110 billion of mobile phone exports by 2026. We expect to hit ₹50,000 crore-plus in FY22 from ₹23,000 crore last year.

“The situation in IT hardware – laptops/tablets – is worrying; we are not only not exporting in a big way, but our domestic demand is largely met by imports and that, too, CBUs. This cannot and should not carry on since this is the second biggest category after mobile phones, and we need massive growth to come near NPE 2019 targets.”

Published on August 24, 2021

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