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Technology

India considers new incentives to woo smartphone manufacturers

Delhi wants to draw investments away from China and Vietnam

India is gaining importance as a manufacturing hub for electronics, as well as a growing market for them.   © Reuters

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

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

In July, India put together a high-level committee under Amitabh Kant, the CEO of policy think tank NITI Aayog, to draw up the plan for building a $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 overseas companies and investors have been flocking to.

According to local media Economic Times, the government is mulling offering 6% duty credit scrips, replacing the current 4% scrip. A duty scrip is a certificate with 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],” the Economic Times quoted a senior government official as saying.

However, another official told the paper that 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.

“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.”

This comes at a time when India is contesting the WTO’s October ruling against the country’s export subsidies, including MEIS. India said it was consistent with provisions of global trade norms, which WTO did not agree with and gave the South Asian nation 90 to 180 days to withdraw those schemes.

A month after the ruling, the government issued a notification saying it would cut 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 Electronics, 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 the iPhone XR and said the devices manufactured in India will be exported as well as sold domestically. Oppo is looking to manufacture 100 million smartphone units locally by the end of 2020, and to 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 $105 million investment planned for India. OnePlus has also recently started exporting smartphones made in India to the U.S. and may convert the country into its manufacturing hub.

KrASIA is a digital media company focused on technology-driven businesses and trends across the Asia-Pacific region. It is part of 36Kr, a tech news portal based in Beijing. Nikkei has a minority stake in 36Kr.

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