| PYQ Relevance: Q Can the strategy of regional-resource-based manufacturing help in promoting employment in India?(UPSC IAS/2019) Q “Success of the ‘Make in India’ program depends on the success of the ‘Skill India’ programme and radical labour reforms.” Discuss with logical arguments. (UPSC IAS/2015) Q “While we flaunt India’s demographic dividend, we ignore the dropping rates of employability.” What are we missing while doing so? Where will the jobs that India desperately needs come from? Explain (UPSC IAS/2014) Prelims: Priority Sector Lending by banks in India constitutes the lending to: (UPSC IAS/2013) (a) Agriculture (b) Micro and small enterprises (c) Weaker sections (d) All of the above |
Mentor comment: Chinese smartphone companies dominate the Indian market, holding over 50% share by 2023. Now, the Indian government aims to balance local manufacturing and Chinese investments. However, there are challenges which include the lack of a robust supply chain and ancillary industries in India. To solve this issue at this point in the geopolitical situation, complete self-reliance on smartphones is difficult in the short term period for India. On the same note, today’s editorial discusses the complex relationship between India and Chinese companies, particularly in the context of the “Make in India” initiative.
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Let’s learn!
Why in the News?
The Indian government is considering allowing certain Chinese investments in high-tech electronics on a case-by-case basis, especially in areas like compressors, display panels, and semiconductors.
- According to the International Data Corporation’s Worldwide Quarterly Mobile Phone Tracker, four of the top five best-selling smartphone brands were Chinese at the end of 2023.
The dilemma between ‘Make in India’ and China’s presence:
| About ‘Make in India’ Initiative: ◉ The Make in India initiative was launched in 2014 to promote India as a global manufacturing destination. ◉ The initiative aims to increase India’s manufacturing sector’s contribution to GDP to 25% by 2025. |
- The ‘Make in India’ aimed to represent India’s strength in manufacturing and National pride, but the Chinese smartphone companies have emerged as significant beneficiaries of this initiative, becoming dominant players over the past decade.
- The widespread use of Android smartphones in India, with a market share of about 70%, has favored Chinese brands, increasing their consumer base.
- Chinese companies have navigated fluctuations in India-China relations, maintaining their market presence until the Galwan Valley incident in 2020.
Initiatives Taken for Indianization in the Economy:
- By Private Players: As a contract manufacturer, Tata Electronics has emerged as a key player in the Indian smartphone manufacturing landscape by replacing Wistron (Taiwanese suppliers for Apple).
- The company also aims to develop local capabilities and reduce dependency on imports by creating high-precision machinery for smartphone components.
- Adaptation of Chinese Companies: Chinese smartphone companies are adapting by complying with Indian government regulations, introducing Indian distributors, and streamlining their operations.
- They are teaming up with domestic manufacturers to benefit from the Production Linked Incentive (PLI) scheme and increasingly seeking equity partners to strengthen their presence in India.
| Production Linked Incentive Scheme: ◉ It is a form of performance-linked incentive to give companies incentives on incremental sales from products manufactured in domestic units. It is aimed at boosting the manufacturing sector and to reduce imports. ◉ In 2021, the Government announced the PLI scheme for 13 key sectors: Auto components, Automobile, Aviation, Chemicals, Electronic systems, Food processing, Medical devices, Metals & mining, Pharmaceuticals, Renewable energy, Telecom, Textiles & apparel, and white goods. ◉ In Budget 2024-25, these incentives were extended to more sectors, such as the small and medium-sized enterprise (SME) sector to participate in the global market. A portion of incentives could be allocated for skill training and capacity building. |
Challenges for complete Indianisation:
- Need for Infrastructure Development: Manufacturing all smartphone components in India requires a robust supplier network, technological knowledge-sharing clusters, and improvements in power supply and workforce conditions.
- Current Limitations: India currently lacks the necessary infrastructure at scale to support complete local manufacturing of smartphone components.
- Technology Sharing Reluctance: Chinese companies are hesitant to share technology without clear equity arrangements, complicating the Indianisation efforts.
Way Forward:
- Address Skill Gaps: Collaborate with educational institutions to ensure that the workforce is equipped with relevant skills in engineering, electronics, and automation.
- Streamline Regulatory Processes: Provide clear regulatory guidelines to create a business-friendly environment that encourages investment.
- Enhance Local Manufacturing Capabilities: Foster innovation and support startups in the electronics sector to create a diverse manufacturing ecosystem and reduce dependency on imports and enhance value addition in smartphone manufacturing.
- Attract Foreign Investments: Continue offering incentives, subsidies, and tax breaks to attract foreign smartphone manufacturers to set up operations in India.
