India’s production push is not moving past the assembly line

Already, influential critics are asking if the much-touted success in becoming a hub for smartphone manufacturing is a hollow claim. Low-end assembly-line jobs, created with the help of expensive state subsidies and protectionist import duties, would only make sense if they were a quick pathway to more sophisticated production, such as of microprocessors.

The Indian government has cut import taxes on some components of mobile phones in a bid to make the local industry more competitive. The move will help the likes of Apple and Samsung to ramp up exports, according to exports. The India Cellular and Electronics Association (ICEA) had earlier submitted a report comparing import duties among India, China, Vietnam and other countries, where they flagged a steep cost disability due to high tariffs on input parts.

India imposes 100% import duty on cars with cost, insurance and freight value of more than $40,000 (about Rs 33 lakh), and 60% for those below that threshold. Tesla is willing to invest up to $2 billion if the Indian government offers reduced import duty of 15% on imported electric cars in the first two years of operations, ET reported in December.

Vietnamese electric vehicle maker VinFast has requested India to reduce import duties on its cars for about two years while a local manufacturing plant comes on stream in Tamil Nadu. VinFast hopes to start production, for domestic sales first and then exports, by the middle of next year. India is considering the requests but has not made a decision.

PM Modi has in recent years promoted India as a smartphone manufacturing hub, prompting companies such as Apple, Xiaomi, Samsung Electronics and Vivo to expand assembly of phones.

Israel's Tower Semiconductor proposes an $8 billion chipmaking plant in India, targeting government incentives. The facility aims to produce 65nm and 40nm chips. While details from the company and India's IT ministry are awaited, chip manufacturing is a priority in Modi's economic strategy. Previous attempts to offer $10 billion incentives faced challenges, with some proposals stalled or scrapped.

The mobile phone industry association has urged the government ahead of the interim budget to have just three import tax slabs of 0%, 5% and 10%, down from seven, so as to simplify tariff applicability and reduce potential litigations

While the government has been pushing for Tesla to manufacture cars locally, the automaker is insisting on lower import taxes initially to make its globally produced vehicles competitive in the Indian market.

The government's production-linked incentive scheme for mobile phones may drive Apple to shift at least 18% of its global iPhone production to India by FY25, with the potential for the Cupertino-based company to expand further if the larger scale incentivises its vendors to also expand in the country, a report said.