India’s Mobile Makers Are Facing Obstacles Preventing Development

Dhir Acharya - Nov 02, 2018

Here are the seven obstacles that are challenging phone makers, preventing India from becoming a global smartphone manufacturer.

In a recent coordination, ICEA (Indian Cellular and Electronics Association) and McKinsey have reported on the insights of the smartphone making sector in India. The report mentioned several obstacles that are blocking Indian mobile producing vision, including export incentives, labor laws, the level of business ease and so on.

One of the biggest bottlenecks the industry faces is the lack of export incentives, which makes it harder for producers to manufacture components and smartphones in this country. It is not possible for manufacturers to make devices for the domestic market only; plus, 4% MEIS (Merchandise Exports from India Scheme) appears to be the only incentive, which will expire this year. In addition, the 1% export duty also holds back the industry.

Secondly, there are no separate areas for mass production like in Vietnam and China. These clusters consist of facilities such as stable power supply, roads, residences, hospitals, schools, etc.

Thirdly, the high cost of capital and limited access to the capital also prevent India from becoming a worldwide manufacturer.

Another obstacle is that India offers no direct tax incentives even for goods made for export. Vietnam and China are giving direct tax incentives for this sector.

The industry-free labor laws, which is considered the key to a successful manufacturing ecosystem, is missing. The company said:

Next, doing business in India is not really easy, according to the report of ICEA-McKinsey. There’s not adequate predictability of how long it takes to unload goods at seaports and airports. It is also important that the government improve the Goods and Service Tax (GST) rules.

Last but not least, India needs to work harder on the design/R&D ecosystem, which can support and aid the component and handset manufacturing ecosystem in India. As stated in the report, to establish a healthy mobile manufacturing ecosystem, it requires setting up native design houses to provide necessities for the domestic market.