Rahul Gandhi Is Wrong – Selfies ‘Generate’ Employment In India, Not China

The Gujarat election in 2012 set the national political discourse, which led to a rapid rise of Narendra Modi as the Prime Minister. Additionally, it also dented the political prospects of Congress vice-president Rahul Gandhi. Before 2012, ‘Where are the issues?’ was a typical question asked by the intellectuals and journalists while discussing elections. But the subsequent period of 2012-14 can be considered as a watershed in Indian politics, where terms like development, good governance and aspirations took the centre stage. The issues like Gujarat Model, Jan Dhan Yojana, Make in India, Ujjwala Yojana, economy and jobs are at hand now.

It is election time again in Gujarat and Himachal Pradesh. Rahul Gandhi seems to have taken a hint from this changed discourse. In his theatrical style, he has been flashing smartphones in his campaign rallies, promising the voters to manufacturing them locally in Mandi in Himachal Pradesh or Surat in Gujarat. While the Gandhi scion focusing on ‘Make in India’ rather than cliches like secularism and minority rights is welcome, he seems actually unaware of the ground reality.

What he doesn’t know is the fact that mobile phone manufacturing has undergone sea change since 2014, thanks to Prime Minister Modi’s push for ‘Make in India’ programme, which he has sought to demonise in rally after rally.

Boost To Mobile Manufacturing

Before 2014, Nokia was the only major mobile phone handset manufacturing company in India. Between 2011 and 2014, an average of 12.5 crore mobile phone handsets were produced in India every year; peaking at 18 crores in 2012-13. This production volume came down by 68 per cent in 2014-15 slipping to 5.8 crore, following the Nokia factory shut down that year.

The ‘Make in India’ campaign was launched by Modi in 2014. Since then, 104 new units of mobile phone handset and component manufacturing have come up, with half dealing with component parts. Mobile phone handset production in India has already crossed the 100-million-units mark; and is set to touch 500 million in the next two years. India has produced 11 crore mobile phones in 2015-16; and 17.5 crore units in 2016-17 (estimated), up from 6 crore units in 2014-15. This means the volumes have tripled in just two years.

Flextronics, a Singapore-based electronic manufacturer, has a capacity to produce about a crore mobile phones in its Chennai facility, making handsets for Lenovo, Huawei and Motorola. Similarly, Chinese companies such as Gionee and Xiomi are producing their handsets at Foxconn plant in Andhra Pradesh.

Ease Of Mobile Manufacturing

In World Bank’s much touted ‘Doing Business Report-2017’, India registered a historic jump of 30 places, now ranking 100 amongst the 190 countries surveyed. This is the highest single year jump registered by any country in this report classification since it was launched. India has improved its rank in six out of the 10 indicators moving closer to international best practices in several areas.

The booming mobile phone manufacturing sector is a classic example of this changing business narrative. Earlier, importing a mobile phone handset used to be cheaper than having it assembled locally. However, now, the local handset-manufacturer assembling the phone has to pay only 1 per cent duty; as against the 12.5 per cent duty levied on an imported phone.

The Make in India programme also provides Modified Special Incentive Package Scheme (MSIPS) and zero-duty on import of all components except adapters, batteries and headsets, to handset makers. The duty differential has clearly boosted indigenisation.

Phased Manufacturing Programme

To promote indigenous manufacturing of mobile phone handsets, Phased Manufacturing Programme (PMP) was announced in the Union Budget 2015-16. Basic custom duty, countervailing duty, excise duty were exempted for parts, components and accessories of the mobile phone handset manufacturing. This gave an impetus to the assembly, programming, testing and packaging (APTP) model of manufacturing mobile phone handset.

Union Budget 2016-17 aims at making India a full-scale components manufacturing hub in the next three to four years. To achieve this goal, the government has changed duty structures around mobile phone components such as the camera module, printed-circuit board (PCB) and keyboards.

FDI In Telecom Sector

Total foreign direct Investment (FDI) in the telecom sector from April 2014 to March 2016 was around $4.19 billion. Under the revised policy, foreign investment in manufacturing is automatically approved and companies can sell products produced through wholesale and retail routes, including e-commerce, without getting government permission.

The Way Ahead

It is forecast that India will have 18 crore smartphones by 2019. This will contribute 13.5 per cent to the global smartphone market, compared to 7.6 per cent at present. India’s domestic mobile phone manufacturing industry is projected to touch Rs 135,000 crore by 2019-20, up from Rs 94,000 crore in 2016-17. Of this, the market size of domestic manufacturing of smartphones is expected to be Rs 120,200 crore by 2019-20, as per a report by the Internet and Mobile Association of India (IAMAI).

The report also estimated that by 2020, about 96 per cent of mobile phones to be sold in India will be locally manufactured. Mobile manufacturing companies are likely to create more than 1.5 lakh direct and more than 10 lakh indirect jobs by 2020, according to the report released by IIM Bengaluru.

A simple Google search from his smartphone would tell Rahul Gandhi that India has already made a mark in mobile phone assembling and is making steady progress in local manufacturing too. With the goods and services tax, the taxation structure is simplified, further boosting the sector. In 2016, two out of three mobile phone sold in India were produced or assembled locally.

When Gandhi takes the next selfie on his campaign trail, he will likely be helping an Indian job boost rather than China’s. Hopefully, he will also trust his phone more than his speech-writers spewing unadulterated rhetorical anti-facts.