Smartphone exports

Selling Rs 100 notes for Rs 80

And saying it is profitable

One of the smartest decisions we made as a country was to protect our markets from Chinese imports in China dominated markets. Key examples being solar cells and smartphones. We increased the cost for our consumers but forced local assembly.

Companies like Dixon got into the human robot business. Sure, we could compete with robots of only there was some subsidy. And so production linked incentive was born. The govt has agreed to dole out over Rs 40,000 crores.

The end result is that we import components worth rs 105 to achieve exports of Rs 100 and provide subsidies worth Rs 6 to make it viable. So far so good. As long as we know what we are doing, it is ok

However, do we know what we are doing. And why.

Take electric buses. The entire subsidy package for e buses has been a waste. An electric bus may be clean but it provides the same transport as a diesel bus which is one fourth the price. Inter city buses were viable for electrification without subsidy – we should have done that first. The state transport corpns continue to be sick. And our electric buses don’t work well.

The same is playing out in solar and smartphones. We are increasing cost to the local consumer, increasing subsidy to the manufacturer

AND

We are disincentivising development of local technologies. Poor quality businesses are very happy being traders converting imported goods to indian by changing name plates.

When such easy options are available, why will anyone do actual technology development. They won’t.

We need to relook at our subsidy framework. Right now it is all warped. iPhone assembly with human robots does very little for indigenisation and for the economy because there is no real value add. The import content is so high that export doesn’t make sense.

This will repeat itself in industry after industry. Production linked subsidies are not good for anyone. They shd be replaced by r&d subsidies for indigenisation.