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Handset output plummets as policy regime weakens

Nokia part shifts production out of India, others follow suit

Despite all the song and dance over promoting manufacturing in India, the ground realities tell a different story. Handset production in the country plummeted last year, from 180m units in 2012 to 125m in 2013, according to a report in Hindu Business Line, quoting the Indian Cellular Association.

Overall export numbers fell 59%, from 110m units in 2012 to 45m in 2013.

By far the biggest handset manufacturer in India is Nokia. However, with tax notices slapped on it, Nokia has responded by shifting a significant part of its manufacturing outside India. Nokia's biggest plant globally is still in India, near Chennai, employing nearly 30,000 people. However, the plant's future is under a cloud after tax authorities sent notices to recover nearly Rs 30 billion, an amount Nokia has disputed.

Following Nokia, several companies have either cut production or shifted manufacturing partially to other countries such as Vietnam and Taiwan.

"The export value of mobile phones has declined from Rs.130 billion in 2012 to Rs.70 billion in 2013. This year it will be down to Rs.30 billion" says Pankaj Mohindroo, President, Indian Cellular Association.

In 2008, the Government identified places such as Sriperumbudur (near Chennai) as hubs for mobile phone manufacturing. A number of companies, such as Nokia and Motorola, set up units to not just support the growing Indian market but also to export.

However, five years on, the business is in ruins. "Policy was not tweaked to encourage local production," says Mohindroo. For example, export benefits were given only for phones with keypads when the market had shifted to touch-screen phones.

"The tax regime has not been positive. We have been asking for a policy to attract component makers," says Mohindroo. Without component-manufacturers, phone-makers import everything, making handsets expensive.

Phone-makers find it cheaper to import devices from China and Taiwan. All Indian phone brands, which together account for 30 per cent of market share, depend on Chinese imports.

From a story in Hindu Business Line

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