INSUBCONTINENT EXCLUSIVE:
An unexpected loss of parliamentary majority for the ruling party has come as a wake-up call
(Photo: Bloomberg)5 min read Last Updated : Jul 19 2024 | 7:26 AM ISTBy Andy MukherjeeNow that a jobs crisis is weakening his hold on
chains, such as those for smartphones and consumer electronics
What could easily be a $100 billion-plus boost to annual factory production by the end of the decade might fail to materialise.
Trouble
on mobile phones to 20 per cent from 15 per cent
Soon it was the turn of components: In 2020, the tariff on printed circuit board assembly and display units was raised by 11 percentage
The Modi administration made it mandatory for Chinese firms to obtain permission before investing in India
of vulnerable firms during the pandemic and promote local industry
Quite the opposite, in fact.
Yes, India manufactured $102 billion of electronics last year, led by mobile phones, up from $60 billion in
From the lithium-ion cell in batteries to the precision machine work needed in phone casings, and the fabrication required in display units,
most of the actual value is being added in China, South Korea, Japan, or Vietnam.
According to a recent report by the Confederation of
answer to this cost disadvantage has been to offer a 4 per cent to 6 per cent subsidy on domestic production
self-reliant in semiconductors
What policymakers should pay more attention to is less capital-intensive production
Yet, very little domestic capacity has come up to make these at home because of a faulty trade policy.
Most of the stuff that goes into
making electronic components can be imported duty-free into China and Vietnam from free-trade partners, whereas a 10 per cent to 15 per cent
tariff is the norm in India
To think that restricting imports will encourage domestic production is an outdated idea
international network of factories
Make it too onerous for Chinese firms to invest (or their engineers to visit), and the production base they could help move from China would
crisis in the most-populous nation has assumed alarming proportions
Even outside the national capital, politicians are panicking and pandering to populist causes
Karnataka, home to the tech hub of Bengaluru, has invited a huge backlash by trying to introduce a law to reserve half or more of
private-sector jobs in the state for locals.
Just as India Inc
is now raising its voice to keep internal markets free, it should also have insisted on more external openness when autarky crept back into
trade policy six years ago
manufacturing and factory jobs continued to elude.
An unexpected loss of parliamentary majority for the ruling party has come as a
Its five-year, $24 billion production-linked incentive program might be supplemented with subsidies for firms that hit employment
targets.
Yet, no amount of additional fiscal resources will help in the presence of high tariff walls
The ongoing shift in global supply chains, triggered by the pandemic-era disruptions and a growing estrangement between Beijing and
Washington, is a once-in-a-generation opportunity for New Delhi
The time for a course correction is now.Disclaimer: This is a Bloomberg Opinion piece, and these are the personal opinions of the writer
They do not reflect the views of www.business-standard.com or the Business Standard newspaperFirst Published: Jul 19 2024 | 6:52 AMIST
