Make in India; the initiative, the current government is pushing has already tasted success, that we have seen with the significant developments happening in the country. Major brands including Apple have promised to make their iPhones in India. There are already many investments made in the factories set up in Noida & also Sri City where Gionee had started their assembly units. All these brands have been importing the phone components mostly from China, where there was a 29.44% of tax levied on the batteries and few other parts that comprise upto 20% of the cost of the phone.
No Import Taxes on Batteries, Speakers, Headsets & Chargers
There has been a lot of pressure from the handset manufacturers on the government following which they have announced that there would be no duties on these components. The step has apparently been taken to offer a boost to the domestic manufacturing that is not kicking off in the country. Even with Countervailing Duties imposed most of the manufacturers are still importing the components from China & reason behind this is the very limited number of component manufacturers.
What are Countervailing Duties: These are the duties that is imposed to stop the imports & help the domestic economy. With these taxes on the products, the final costing increases giving the locally manufactured goods a boost concerning the competitive pricing. Some large manufacturers dump their products at a lower price or even at subsidized prices to ensure that the domestic makers cannot compete with them. The government imposes these based on the specifications by WTO (World Trade Organization) when they find particular exporters dumping their products. There is a 12.5% CVD on finished handsets imported in India.
In the last two years, there have been a lot of assembly plants setup that are primarily into assembling the components that are imported. We are yet to see a complete marketplace structure where parts like PCB’s are also manufactured. Again, this can only happen when there are changes made to Manufacturing Labor Laws that are in the interest of these factories along with supplier lineup. The revolution would still take a few years, but at this moment, the government has made a surprising move by eradicating all the taxes on these components imports from May 4th. There are chances that this step could be taken back after six months to 1 year depending on the results but at this moment, this could be welcomed by factories that have been assembling components from China.
Editors Note: These initiatives could help the prices of the currently sold Smartphones in India to drop by another 20% only if these brands would be passing the same to their customers. In the recent times, we have seen LeEco that is setting up their Make in India plant apart from Vivo that’s also taking part in the similar initiatives. Surprisingly under the Top 5 Global Smartphone Brands both the Vivo & OPPO Brands are listed that are already setting up their manufacturing plants in the country. These are the brands that could get the benefit of the current tax exemption, that could help them grow the market share in the country.