- A recent spat between former RBI governor Raghuram Rajan and Minister of State for Electronics Rajeev Chandrasekhar exposed diverging views on the efficacy of a Central government effort aimed at boosting Indian electronics manufacturing.
- The debate is around whether the system actually encourages self-sufficiency and robust manufacturing or merely creates low-level assembly employment that rely on imports.
A Critical Examination of the PLI Scheme
- Intentions of the Government: Around five years ago, India set out on a mission to revitalise domestic manufacturing as a pillar of economic growth.
- Dual Approach: To boost manufacturing, the government used a twin policy of increasing import levies (the’stick’) and offering incentives (the ‘carrot’). The Production-Linked Incentive (PLI) plan evolved as a crucial component, providing financial assistance to enterprises engaged in domestic production.
Concerns and Triumphs
- Concentration on Smartphone Manufacturing: Among several industries, smartphone manufacturing stood out as an early adopter of the PLI plan.
- PLI’s Impact on Smartphone Exports and Imports: The programme produced outstanding results, with mobile phone exports increasing from $300 million in FY2018 to a staggering $11 billion in FY23. Furthermore, mobile phone imports fell from $3.6 billion in FY2018 to $1.6 billion in FY23.
Examining Criticism
- Rising Imports of Components: The spike in imports of mobile phone components such as display screens, batteries, cameras, and printed circuit boards between FY21 and FY23 is a major source of controversy.
- The critique questions the common notion of localised production, claiming that manufacturers mostly assemble imported components.
Counterarguments
- Diverse Component Uses: In response to the allegation, the response asserts that imported components, such as screens and batteries, could be used in businesses other than mobile phones.
- Partial PLI Implementation: According to the response, the PLI scheme supports just about 22% of mobile production in India.
- Clarification of Import Dependency: It is emphasised that not all imports are used in the production of mobile phones.
Disagreement in the Middle
- One critical viewpoint emphasises that even if a fraction of imports are utilised for production, India’s net exports remain negative.
- The Point of Disagreement: The crux of the argument is whether the PLI programme would deliver long-term job development and improve India’s manufacturing prowess to include value-added products.
@the end
- The lively conversation captures the complexities of India’s electronics manufacturing strategy.
- While both sides give strong arguments, one fundamental question remains: Can the PLI programme actually promote long-term job prospects and propel India to become a centre of value-added manufacturing?
- Striking the correct balance between rewarding domestic manufacturing and investing in broad socioeconomic growth remains a tough challenge as India sets its economic future.
Source: https://www.thehindu.com/business/Industry/explained-the-debate-over-indias-smartphone-manufacturing-dreams/article67220769.ece