That was a tough header to compose. How was it that an Indian company that had the largest share of the Indian market was importing mobile devices from China?
Anyway, that has been the case so far. It’s about to change. Not necessarily true that making things in India will be cheaper. While labor may be cheaper, what really matters is productivity. Even if the wages are low, if their output is even lower, the game is lost. And as the report states, India’s tax rules have driven many manufacturers away. One hopes the NTP 2012 and the National Electronics Policy will trump those who get their kicks through tax torture.
More importantly, assembling the devices in India could also allow Micromax to make its phones even cheaper thanks to lower wages than in China and incentives from a government keen to kickstart domestic high-end manufacturing.
The Indian tech blog Medianama suggests that Micromax’s move may be part of India’s National Policy on Electronics, which envisages the creation of “an eco-system for a globally competitive Electronic System Design and Manufacturing (ESDM) sector in the country to achieve a turnover of about $400 billion by 2020 involving investment of about $100 billion and employment to around 28 million people at various levels.” By manufacturing in India, Micromax stands to benefit from an “industry-friendly” tax regime, “preferential market access” and “promotion of exports,” according to the policy.
Despite India’s enthusiasm for local manufacturing, however, it hasn’t always been kind to those who do make electronics in the country. India’s fickle tax rules, which embroiled everybody from Vodafone to Shell in multi-year disputes, nearly drove Nokia’s manufacturing plant out of India after a spat over taxes boiled over in September.
I keep being asked about how countries can reduce the outflow of “valuable foreign exchange” for imported mobile devices. I used to point to India as one country that could very well justify local manufacture, in contrast to smaller economies where such a rational did not exist. The funny thing was that except for Nokia’s misadventure, no mobile device manufacturing actually happened in India. Perhaps this will stick.