According to former Reserve Bank of India (RBI) Governor Raghuram Rajan, the apparent surge in India’s mobile phone exports conceals the full picture due to the accompanying imports of components used in manufacturing these devices.
Rajan pointed out that when considering the imports of inputs, it becomes challenging to maintain that net exports have actually increased.
In the fiscal year 2018, mobile phone imports amounted to approximately $3.6 billion, while exports stood at $334 million. However, by FY23, inbound shipments decreased to $1.6 billion, and exports rose to $11 billion, resulting in net exports of $9.8 billion, as per an analysis by Rahul Chauhan, Rohit Lamba, and Raghuram Rajan.
The research note revealed that the rise in mobile phone exports was accompanied by higher imports of inputs such as semiconductors, printed circuit boards, displays, cameras, and batteries.
When accounting for these imported inputs, the combined inbound shipments reached $32.4 billion in FY23, making India a net importer of components worth $21.3 billion after adjusting for the value of assembled phone exports.
The research suggests that companies may be importing knocked-down kits instead of finished phones to take advantage of government tariffs and production-linked incentives for phone assembly in India.
Rajan noted that India still relies heavily on imports for mobile phone components, which makes it difficult to argue that net exports have truly increased.
The authors of the research note emphasized that the subsidy provided by the government for finishing the phone in India does not reflect the value added through manufacturing, raising concerns about the effectiveness of the scheme.
The analysis highlights the need for India to focus on producing component parts to enhance the value added within the country’s mobile phone manufacturing industry.
