Smartphone sector needs PLI 2.0 boost

GoI is right in considering extending PLI for smartphone exports to sustain their momentum. India's runaway success with smartphone exports has a demonstration effect on other industries where such incentives are being offered with varying degrees of success. The messaging works both ways, to potential foreign investors and local vendor ecosystems, about India's intention of becoming a global manufacturing base in select industries. The surge in smartphone exports occurred in the backdrop of US tariff changes that worked to India's advantage. There is a likelihood that Chinese smartphone exports to the US may revive as the Trump administration reworks tariffs following this month's adverse US Supreme Court verdict. Continued export subsidies are required to offset the comparative advantage of Chinese smartphone exporters.

The smartphone industry has several unique characteristics that make it the poster child for Indian exports. Apple and Samsung, the biggest smartphone manufacturers globally, are serious about their India plans. Their brands dominate global smartphone sales, which addresses market-access issues faced by new exporting nations. The products made in India sit on the top shelf of handset makers' portfolios and demonstrate local manufacturing capability. Finally, smartphones have deep linkages with software development, where India can push its existing advantages.

India also happens to be a dynamic market for smartphones where Chinese makers of mid-segment handsets are in retreat after a decade-long dominance. A sustained export push could create space for strong local brands to emerge. The ecosystem seeded by Apple and Samsung will have positive externalities for broader electronics exports. Extended export subsidies can be expected to increase local value addition. Smartphones provide a ready pathway to high-value manufacturing with rising localisation levels. The exception to time-bound export subsidies for smartphones also justifies itself through employment intensity.