Friday, August 17, 2018

Rare industrial policy success in India

Manufacturing of mobile phones has got a boost from industrial policy pursued by Government of India,
Xiaomi, by far the top-selling Chinese smartphone brand in India, started having handsets assembled in the country by Taiwan’s Foxconn in 2015, and now says 95 per cent of those sold in India are put together there... In April Xiaomi said it had started local production of the printed circuit boards that are the heart of every smartphone. It made the announcement at a conference of dozens of international suppliers it had invited to India to discuss local investment opportunities. Xiaomi’s actions... reflect smart if belated policy moves by Narendra Modi’s government. Onshore phone assembly has boomed since the 2015 introduction of stiff tariffs on imported handsets. Crucially, the government has also taken steps to encourage domestic manufacturing of the parts inside phones. Xiaomi timed the start of printed circuit board production in India to coincide with the April introduction of an import duty on the item — part of a multiyear programme to gradually introduce tariffs on smartphone components, starting with basic accessories such as chargers in 2016 and working up to touch panels next year.
More importantly, great example of why free trade and lower duties are not always the best solutions.

Could the restrictions imposed by the Reserve Bank of India and the draft e-commerce policy on data location be another success? As part of the data protection policy, the RBI has already mandated that by October 2018, all payment firms like Visa, MasterCard, PayPal etc will have to keep their Indian data exclusively in India based servers. The draft e-Commerce policy too requires the same for social media, search engines, and e-commerce firms within two years. China already has the same policy. If all goes well, it could give a fillip to the country's IT industry.

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