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Developing India’s Mobile Phone Manufacturing Industry
In the absence of any major domestic mobile phone manufacturers, increased imports of mobile phones have contributed to a widening of India’s trade deficit. An analysis of the policy instruments put in place to incentivise the domestic manufacturing of mobile phones reveals a spike in domestic manufacturing, leading to significant reductions in the imports of mobile phones. However, domestically manufactured phones are dependent on imports of parts. This high import dependence itself is an outcome of the weak innovation capability in the domestic industry.
The author is grateful to Amiya Bagchi, R Nagaraj and Sudip Chaudhri for comments on an earlier draft of this paper.
A longer version of this paper has been published as a Centre for Development Studies Working Paper.
Over the last several years, the country has been concerned with increasing the size of its manufacturing sector to at least a quarter of its gross domestic product (GDP). This was sought to be accomplished first, through a manufacturing strategy and, specifically, since 2014 through the “Make in India” programme. Nagaraj (2019) has shown that the latter programme, while improving India’s ranking in the World Bank’s Ease of Doing Business index, has failed to improve the performance of the manufacturing sector or the technological capability as a whole. The widening trade deficit in manufactured good and in technology payments are enough empirical proof to show that the programme is yet to deliver. Further, manufacturing employment has also been a casualty. Our dependence on both multinational corporations (MNCs) and on imported components and parts have increased in the recent past. In fact, since the liberalisation of India’s industrial sector, import dependence of the sector has been on the rise (Mani 1991; Chaudhuri 2013). A manufacturing industry where this is clearly evident is in the domestic manufacture of mobile phones. Misra and Shankar (2019) have done an empirical analysis to show that India’s consumption-driven imports of fully assembled mobile phones have been transformed to production-induced imports of parts for manufacturing mobile phones domestically. This transformation is then hailed as a desirable outcome of the recent policy attempts to increase the size and content of India’s domestic manufacturing industry, especially in electronics products and telecommunications equipment in particular.
Telecom Market in India
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