Lok Sabha Question No. 574 (UNSTARRED), answered on 2020-02-05
Subject: Manufacturing of Smartphones and FDI in Telecom Sector
Ministry: COMMUNICATIONS
Asked by: Shivkumar Chanabasappa Udasi

## GOVERNMENT OF INDIA MINISTRY OF COMMUNICATIONS DEPARTMENT OF TELECOMMUNICATIONS

## LOK  SABHA UNSTARRED QUESTION NO. 574 TO BE ANSWERED ON 5 TH  FEBRUARY, 2020

## MANUFACTURING OF SMARTPHONES AND FDI IN TELECOM SECTOR

## 574. SHRI SHIVAKUMAR C. UDASI:

Will the Minister of COMMUNICATIONS be pleased to state:

- (a) whether the deregulation of FDI norms in telecom sector of the country has benefitted the locals in terms of employment opportunities and if so, the details thereof;
- (b) the measures taken/being taken by the Government to meet certain predictions of market analysts like International  Data  Corporation  (IDC)  that  has  opined  that  India  may  overtake  US  as  the  second-largest smartphone market globally soon;
- (c) whether the Government has charted out a policy to enable switching to smartphones with the total smartphone traffic expected to grow seventeen-fold to 4.2 Exabytes (EB) per month by 2021 and gradually upgrade these sets to 4G operations and if so, the details thereof; and
- (d) whether the Government has reckoned the aspects of national security while giving green signals to foreign  companies  to  invest  in  the  telecom  sector  such  as  the  Chinese  companies  LeEco  that  has  planned manufacturing  of  smartphones  at  Greater  Noida  in  collaboration  with  Compal  Technologies,  Huawei  in Bangalore and Gionee with the US contract manufacturers Foxconn and Dixon and if so, the details thereof and if not, the reasons therefor?

## ANSWER

## MINISTER OF STATE FOR COMMUNICATIONS, HUMAN RESOURCE DEVELOPMENT AND ELECTRONICS & INFORMATION TECHNOLOGY (SHRI SANJAY DHOTRE)

- (a) As per extant Foreign Direct Investment (FDI) policy, FDI upto 100% under the automatic route is permitted  for  electronics  manufacturing  including  manufacturing  of  cellular  mobile  phones,  subject  to applicable laws/ regulations; security and other conditionalities.

As  per  the  Confederation  of  Indian  Industry  (CII),  the  direct  employment  in  electronics  hardware manufacturing  industry  in  the  country  is  estimated  to  be  about  20  lakh  persons.  As  per  the  information provided by India Cellular and Electronics Association (ICEA), about 6.7 lakh persons are employed (directly and indirectly) by the units manufacturing cellular mobile phones and parts/ components thereof.

- (b) As per the information provided by India Cellular and Electronics Association (ICEA), India is expected to overtake USA to become the world's second largest smart phone market in 2019-20 in volume terms, followed by China. The measures taken by Government to promote cellular mobile handset manufacturing ecosystem in the country, inter-alia , include:
- i. Rationalized tariff structure and a Phased Manufacturing Programme (PMP) for the promotion of manufacturing of mobile handsets and their sub-assemblies/ parts.

- ii. Units  manufacturing  Mobile  handsets  and  their  sub-assemblies/  parts  were  also  eligible  for availing Capex benefits under the Modified Special Incentive Package Scheme (M-SIPS), which was open to receive applications till 31.12.2018.
- iii. 100% FDI is permitted for manufacture of mobile handsets and their sub-assemblies/ parts.
- iv. Specified capital goods for manufacture of mobile handsets are permitted for import at 'Nil' Basic Customs Duty (BCD).

To  promote  domestic  value  addition  in  cellular  mobile  handsets  and  their  sub-assemblies/  parts manufacturing, a Phased Manufacturing Programme (PMP) has been notified. As a result, India has rapidly started attracting investments into this sector and significant manufacturing capacities have been set up in the country during the past four years. The manufacturing of mobile handsets and their parts/ components has been steadily  moving  from  Semi  Knocked  Down  (SKD)  to  Completely  Knocked  Down  (SKD)  level,  thereby progressively increasing the domestic value addition. The production of cellular mobile handsets has gone up from Rs. 18,900 crore (6 crore units) in 2014-15 to Rs.1,70,000 crore (29 crore units) in 2018-19.

The Government has notified the National Policy on Electronics 2019 (NPE 2019) on 25.02.2019, with the vision to position India as a global hub for Electronics System Design and Manufacturing (ESDM) and create  an  enabling  environment  for  the  industry  to  compete  globally.  Under  the  aegis  of  NPE  2019, Government  shall  promote  domestic  manufacturing  and  export  in  the  entire  value-chain  of  electronics  to achieve  a  turnover  of  USD  400  billion  by  2025.  This  includes  targeted  production  of  1.0  billion  mobile handsets by 2025, valued at USD 190 billion, including 600 million mobile handsets valued at USD 110 billion for export.

(c) The adoption of smartphones by consumers is their personal choice and depends upon their preference, availability and market dynamics.

(d) As per extant Foreign Direct Investment (FDI) policy, FDI upto 100% under the automatic route is permitted  for  electronics  manufacturing  including  manufacturing  of  cellular  mobile  phones,  subject  to applicable laws/ regulations; security and other conditionalities.

It  may  be  noted  that  all  companies  who  are  currently  operating  in  India/  setting  up  manufacturing facilities  in  the  mobile  handset  eco-system  are  expected  to  comply  with  various  regulatory  and  legal requirements under the law.

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