- It’s quite understandable when the government authorities consider laying focused emphasis on the manufacturing sector even as the strong emergence of the services sector challenges the more traditional form. The manufacturing vertical in India, which is still predominantly an agrarian nation, must compete not only with the technology-driven services sector but also with the agriculture vertical, which is still the backbone despite enormous development everywhere else. The nation’s growth prospects can be said to be on a tangent when all the crucial sectors show signs of growth enabling the citizens to feed on the accruing benefits. Mind you, in a populous country like India, employable youths looking out for job opportunities are humongous but seldom available.
PC: freepik
- Against this backdrop, Big Tech companies like Apple opening their first Indian retail stores in Mumbai and Delhi must be considered a milestone. As we are aware, not only is the maker of one of the world’s most iconic consumer electronic products upbeat on the Indian market, but it’s also crucial to the Union Government’s aim to attract companies to relocate part of their manufacturing supply chain to India. Note that China’s strategic rivalry with the US presents India with an opportunity to ramp up electronics manufacturing activity. Between April 2022 and January 2023, India exported a record $8.35 billion worth of smartphones. Electronic supply chains are global, with production split across countries.
- India’s smartphone exports came on the back of a surge in imports of phone parts, which reached a record $6.5 billion between April 2022 and January 2023. In addition, imports of other related items increased. Remember, Apple belongs to a unique category of global firms and factory manufacturers. Its assets are the IP and a skilled workforce. The manufacturing is entirely outsourced. As Apple’s market is global, India’s trade policy will influence its decision to expand its manufacturing presence here. The year 2017 marked an inflection point in India’s trade policy. Protectionism crept in through generalized tariff increases. WTO’s database showed that between 2017 and 2021, India’s average applied tariff increased by 4.5 percentage points to 18.3%.
PC: freepik
- Consequently, the lines exceeding 15% of duties almost doubled. In contrast, Vietnam, which competes with India to attract manufacturing supply chains, smartly kept its average tariff unchanged at 9.6%. Vietnam also signed up for two crucial preferential trade agreements boosting its manufacturing thrusts even further. These agreements amplify the advantages of India’s competitors as they divert trade from non-members to constituents of these trade bodies. Indian think tanks also should consider joining regional trade blocs rather than hanker over protectionist measures. Thus, India needs to review its trade policy if it wants to expand on its early promise in the smartphone assembly industry. Bilateral trade agreements fall short and protectionism results in stagnation.
