Phone assembly domestic value addition is 23%, new report claims
Specifically, the report does not agree with the notion that phone assembly is an area of 'trade surplus,' a point contended notably by RBI governor Raghuram Rajan, who said in a brief paper with a colleague, Rohit Lamba, that since India was still importing nearly all components that were being assembled in mobile phone manufacturing, the result was India remaining a net importer in effect.
Mobile phone manufacturing — encouraged through Union government schemes like the Production Linked Incentive scheme — has been a much touted success story for Indian domestic electronics manufacturing, fueling hopes of similarly promising results elsewhere. ₹4.1 lakh crore of finished mobile phones were manufactured in India in 2024 according to an industry estimate. The number isn't necessarily indicative of phone assembly as a part of the economy as assembly is usually estimated to only account for 4% of a phone's selling price.
The case against India running a phone trade surplus rests on a 'misleading assumption' that imports of the components that go into such assemblies are exclusively going into phones, and then getting shipped back out of the country, C. Veeramani, CDS's director said. 'We used data from the Annual Survey of Industries, and that shows that the actual use of imported components in the mobile phone sector is less than 25%.'
Dr. Veeramani reported his findings to the press at an event by the India Cellular and Electronics Association (ICEA), a trade body representing electronics manufacturers; the CDS director's estimates of domestic value addition were even higher, he said, than the ICEA's: 'The Total DVA (direct + indirect) increased to 23%, amounting to more than $10 billion in 2022-23,' the report says.
China factor
A key recommendation in the report is to focus on scaling assembly operations in the medium term, rather than pressing firms immediately to procure components from local sources. 'We cannot have a robust [electronics manufacturing] strategy keeping China out, that will not work,' Dr. Veeramani said. 'China has to be part of the game and a mindset change is needed there.' If Chinese firms were invested in India, Dr. Veeramani said, they would have no incentive to block movement of capital goods and Chinese nationals to India, something that some phone and semiconductor makers are facing in recent months.
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