The Indian manufacturing industry is in a take-off stage. With government incentives, India will be able to attract FDI, significantly increase the size of the existing domestic manufacturing industry, and drive IP and design-led manufacturing so that the industry can compete globally. The government stands to gain too. For instance, once the manufacturing targets are realised, at an 18 percent GST, it can expect to net ₹50,000 crore from mobile phones and ₹15,000 crore from telecom equipment. This does not include the additional, anticipated direct tax from the manufacturers.
The production-linked incentives (PLI) scheme, already under implementation, offers a 6 percent incentive in the first year to the mobile phone manufacturers, once they meet their investment and production targets. Production is expected to increase from ₹1.81 lakh crore in FY19 at 290 million units, to ₹10.5 lakh crore in FY21, to ₹14.25 lakh crore by 2025, at one billion units. There is a caveat here. In comparison with Vietnam and China, that together accounts for 72 percent of global mobile phone exports, the Indian market has disabilities and no matching incentives to export. The WTO challenge on Indian export subsidy measures also come into play. ICEA has proposed that an incentive of 8-10 percent of the turnover is what it will take to attract the anticipated ₹3000 crore global investment.
Telecom equipment manufacturers too are poised to benefit from the PLI scheme. Guidelines have been approved by the DCC. From a government outlay of ₹12,195 crore, a total incremental production of ₹2.4 lakh crore over a period of 5 years can be expected, with domestic sales value at ₹1.2 lakh crore.
The Indian PCB assembly manufacturers have also come forth and proposed the possibility of a cumulative export opportunity of ₹8.2 lakh crore and a domestic market of ₹6.53 lakh crore over the next 5 years. For this, PCBAs are seeking a separate PLI scheme of 3 percent and a support of 6 percent, under the RoDTEP scheme. In 2020, with all major phone brands having sourced PCBAs locally, valued at ₹80,000 crore, PCBA imports were a meager ₹2050 crore as against ₹33,600 crore 3 years ago.
The month of March is critical for the telcos as they gear up for 5G trials, 4G spectrum auction, and resolve the confusion on their respective AGR dues to be paid before March 31.