Union Budget 2023: Outlook for the Indian Smartphone Industry

The smartphone industry in India has received a significant boost from the recently announced Union Budget 2023. The government has implemented a reduction in customs duty on certain parts and inputs, including camera lenses. It has also extended the concessional duty on lithium-ion cells for batteries for another year. The aim of these measures is to promote localized manufacturing of mobile phones through Indian mobile manufacturer companies.

India is now the second-largest producer of mobile phones globally. This is largely due to the government's supportive policies and incentive schemes. India has positioned itself as a central electronics hub, with global players adopting the China plus 1 strategy.

Key Drivers for Growth in the Indian Smartphone Industry

India has become a leading player in the smartphone industry, as per the official government figures. The country's mobile phone output surged from 5.8 crore units in 2014-15 to 31 crore units in the last fiscal year. During this period, the country produced 310 million units worth ₹2,75,000 crore. This indicates a significant increase in the industry's contribution to the country's economy.

• One of the main drivers of growth in the smartphone manufacturing industry is the adoption of 5G networks.  This will lead to an increase in average selling prices and further the premiumization of the smartphone industry. As consumers pay higher prices for 5G-enabled devices, both the FMCG and smartphone industries will benefit.
• Another key driver of growth is the strong technology upgrade induced by cell phone manufacturers. It is likely to open up opportunities for cell phone manufacturers in India to increase their revenues. There is also a rising desire among consumers to upgrade their devices to newer models.  Indian mobile manufacturer companies will have the opportunity to sell more units and enjoy the increased demand.
• The pick-up in domestic manufacturing is another driver of growth in the smartphone industry. As manufacturing gets prevalent, the smartphone industry will get access to reliable components like aluminium frames, circuit board etc. This will drive local manufacturing and lower the prices of locally made phones. It may further drive demand for locally made devices and stimulate growth in the industry.

Also Read:- Indian Union Budget 2023: What's Ahead For SMEs?

Government Initiatives to Support the Industry

The government's policies and incentives play a crucial role in boosting the smartphone industry. It has focused on providing a competitive environment to the industry. Many incentive schemes promote localized manufacturing of mobile phones.

• One of the key policies announced in the Union Budget 2023 is the continuation of nil customs duty on some mobile phone components. Manufacturers will not have to pay any customs duty on these. This will promote localized manufacturing and help lower the prices of domestic phones.
• There is also a proposal to raise the limit on presumptive taxation for Micro, Small, and Medium Enterprises (MSMEs) and certain professionals.This move will provide relief to these segments of the industry and help promote their growth.

The smartphone industry is poised to cement India's position as an electronics powerhouse in the world.

Challenges Facing the Industry

• The mobile phone manufacturing industry in India has grown a lot, but it has some challenges. The demand for budget models has decreased as consumers spend more on premium smartphones. The industry also faces supply chain disruptions due to COVID-19 restrictions in China.  This often results in a shortage of key components like lithium cell batteries etc. The government's increased scrutiny of smartphone brands can impact the industry in the short term. Despite these challenges, the government's policies and incentives continue to support the industry.

Also read:- Union Budget 2023: Outlook for the Renewable Energy Sector

The Union Budget 2023 shows commitment to promoting localized manufacturing. It also aims at providing a competitive environment and offering various incentive schemes to the industry. The concessions on certain imports for mobile phone manufacturing will promote localized production. Despite some concerns eg. about supply chain disruptions, the government's policies and incentives promote the sector's growth.