Local phone manufacturing saves India ₹3 trillion through Make in India

• A report by the India Cellular and Electronics Association (ICEA) shows that import substitution of cellphone manufacturing resulted in savings of ₹3 trillion.
  
• In 2014, 80% of the domestic demand for phones were met by imports, but now that demand is met through domestic manufacturing.
  
• India’s e-commerce policy and its ‘India first’ stand also have the objective of promoting local manufacturing and industries.

There’s been much a discussion about India’s e-commerce policy being ‘India first’. It’s actually quite similar to the debates that happened around the ‘Make in India’ with respect to mobile manufacturing. Both policies have the same underlying objective, to create a level playing field for foreign as well as domestic players in the Indian marketplace.

According to a study by the India Cellular and Electronics Association (ICEA), the resurgence of mobile handset manufacturing in India has saved India nearly ₹3 trillion ($43 billion) by substituting imports with domestic assembling over the past four years.

Before ‘Make in India’ came into the picture, India was importing nearly 80% of its domestic demand for phones. Come 2018, the country has poised itself to go head-to-head with China as the world’s second largest mobile handset manufacturer, where the ratio has shifted to the 80% of the domestic demand for phones being met through domestic manufacturing.



It’s not just manufacturing

When a nation implements import substitution, the effect goes beyond just preserving the country’s foreign exchange reserves to actual growth the gross domestic product (GDP) of the targeted sector.

Even infrastructural development takes place through more factories and manufacturing hubs being set up, followed by an increase in the employment in manufacturing as well as all the horizontal sectors like construction, real estate and transport. Those sectors have their own verticals that play into the primary sector for raw materials and the tertiary sector for advertising and other consumer-end activities.

That being said, the shift of phone manufacturing through Make in India was only successful in cohesion with the impetus provided by the Digital India initiative. The penetration and increase in net speed, as well as the localisation of apps and digital governance, catalysed the demand for phones in India that make manufacturing locally attractive through the growing market demand.

So, what does that have to do with the e-commerce policy?

The draft e-commerce policy put forward by the Indian government has a lot that plays in the favour of Indian companies. So much so that a recent report by the Mint analysed that, rather than the e-commerce war being limited to the American giants, Amazon and Walmart, the biggest competitor in the market might actually be Reliance Retail Ltd.

The suggested change in the inventory model will be a huge obstacle for Amazon and Walmart, who recently acquired Flipkart in India, since their supply chains usually ignore the local medium, small and micro enterprises (MSEs) and globally source products at competition distorting prices.

If foreign-funded firms are no longer allowed to hold their inventory in India, then they won’t be able to fully capitalise on their logistical advantage. This is especially true for Amazon, who’s supply chain operations are what gives it the edge in the American market.

Even globally, the battle is between Alibaba and Amazon according to Website Builder Expert’s data analysis.



That being said, the deep-discount sunset clause of the policy will finally give start-ups and MSMEs a chance to get their foot in the door without being the collateral damage in contests like Prime Day vs Big Shopping Day, where both Flipkart and Amazon compete for sales on thin margins.


The e-commerce policy already has the Digital India initiative even place to push India’s e-commerce market forward. Reports show that the market is set to boom from $38.5 billion (₹2.5 trillion) to $200 billion (₹14 trillion) in 2026. That’s a $161.5 billion (₹11.5 trillion) opportunity for Indian retailers to monopolise on.