India is confident of luring mobile phone makers leaving China for Vietnam fearing the US sanctions as President Donald Trump threatens to escalate a trade war with the Asian giant. A panel led by NITI Aayog CEO Amitabh Kant is firming up a strategy that could ease the process for the mobile phone manufacturers to set up production centres in India, media reports suggest. The panel's task is to prepare a blueprint to snatch back the initiative from Vietnam, which surged ahead of India after trailing it for some time.
The Kant panel whose recommendations are expected soon boost electronic items' export in general and mobile phones in particular, a report in the financial Express website said. The government set up the committee in the context of the failure of India's phased manufacturing programme (PMP) for mobiles under Prime Minister Narendra Modi's the Make in India initiative while production of mobile handsets grew but imports outpaced it.
Indian authorities reckon that higher unit production cost is the reason that the manufacturers fleeing China to escape the US trade sanctions are shunning India for Vietnam. The Kant panel will suggest a programme to ensure that the production cost in India remains competitive.
India had headstart
India's apparent headstart by producing 140 million handsets compared with 38 million in Vietnam, gradually disappeared with smartphone sales rocketing, the report says. While both the countries produced a similar number of phones in 2017, Vietnam went way ahead following the closure of the Nokia factory in Chennai. Indian exports plummeted from the peak $4 billion, the report says. Last year saw a mild recovery to $2.7 billion. Vietnamese exports, however, have surged from $2.3 billion in 2010 to $49 billion in 2018.
Fact is Vietnam is pacing ahead of India on several other electronic products. Trade statistics show that while India's exports of electronic goods other than mobile phones have been flat around $5 billion since the beginning of the decade, Vietnam's exports rose about 10 times, from $3.6 billion in 2010 to $34.5 billion last year, reports show.
Industry experts say India may have to match Vietnam in providing a better industrial environment to find success in luring some of the manufacturers eyeing Vietnam. The tax breaks that corporate houses enjoy in Vietnam are termed to have a lot of attraction for large manufacturers.
Though nowhere near China's dominance over global exports at 60 per cent, Vietnam is said to be an emerging powerhouse with already 10 per cent of the export market. Big players like Samsung have moved to Vietnam to hedge their investment in case of a long standoff between Trump and Chinese President Xi Jinping.
The report quotes Counterpoint research associate director Tarun Pathak as saying, "Vietnam has a competitive edge over China in terms of labour and manufacturing costs, though China still dominates in terms of skill set, infrastructure and overall manufacturing efficiency."
India is not limiting its focus on electronics while anticipating a new world economic order. The Commerce Ministry under Piyush Goyal reckons that India can boost exports of some 350 products such as chemicals and granite to both US and China. A study by the Ministry officials says there are more than 150 products whose exports to China will gain traction because of the trade war. It has also identified that more than 200 Indian goods from rubber to graphite electrodes can substitute Chinese products.