Is Govt Doing Enough To Boost IT Manufacturing?

by CXOtoday News Desk    Jun 23, 2014

mobile manufacturing

While the government has announced major plans to boost electronics manufacturing in India, the industry is still not certain about it as it believes there are still issues that need to be sorted out in this regard.

Recently, Communications and IT Minister Ravi Shankar Prasad said incentives would be given to companies that set up green-field units in eight cities, including Ghaziabad, Vadodara, Gandhinagar, Ahmedabad, Nagpur and Nashik. However, handset and PC makers contend that incentives apart, the government should take care of tax issues, which vary across states, and is still the most neglected area.

Focus on tax issues

Incentive scheme alone will not be a decisive factor for investment in manufacturing, believe experts. According to them, the government should urgently look into the concerns around value-added tax (VAT) and goods and services tax (GST) so that investors benefit from manufacturing.

“The current tax and customs duty structure makes domestic manufacturing of handsets unviable, they say. It has been noted that handset makers have not been able to shift production from China to India,” Vikas Jain, Co-Founder of Micromax, told Business Line. He believes that affordability will be the game changer for the Indian mobile market, with consumers looking for ‘value for money’ products.

Anwar Shirpurwala, Executive Director, MAIT opines, “Recognizing the multifaceted contribution of manufacturing and electronics on a war-footing basis, the government should prioritize reforms that can navigate the challenges the manufacturing and ICT industry face every day. It should give boost to local manufacturing, early implementation of goods and service tax and credible policies to attract investments.”

MAIT is looking for a clarity on the GST implementation timeline with uniformity in procedures and documentation across the country. The apex body representing India’s IT hardware sector, last week had also come out with a recommendation document for the IT hardware industry, ahead the upcoming Union Budget 2014.

Creating greater opportunities

While experts believe that the government needs to form an economic zone if it wants the Indian industry to be at par with China, they believe the government also focus on research and development and introduce a simpler process for intellectual property rights (IPR). Sanchit Gogia, Chief Analyst at Greyhound Research opines that the Chinese are more competitive in putting together smartphones since the cost of production there is lower than in India. Moreover, tie-ups with international manufactures further add to the sophistication and cost of smartphones.

Electronics manufacturing can create more jobs in the sector and secure India’s position as a global manufacturing hub. Toward this direction, experts believe the government’s focus on semiconductor fab facilities can create opportunities for IT hardware and software sector, thereby helping businesses lower the cost when setting up new units or go for expansion.