Mobile telephony growth is now completely dependent upon imports; states Broadband Indian Forum

11-01-2018 My Mobile

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Mobile telephony growth is now completely dependent upon imports; states Broadband Indian Forum

Broadband India Forum (BIF), today, organised a summit titled ‘Mobile Telephony in India – Towards a Sustainable Innovation Economy’ in New Delhi, which highlighted key issues of mobile telephony in Indian economy. It also addressed key factors that will provide greater push to the Make in India initiative in this sector.

NITI Aayog points out that OEMs or ODMs or component/accessories suppliers are still in infancy in India and most of it is confined to last mile assembly. Towards this, the report analyses the economic and social potential of the mobile manufacturing sector and assesses its preparedness to support Make in India.

The findings of the report highlight three significant issues affecting India’s indigenous mobile telephony and other telecommunications equipment sector growth and therefore also affecting Make-in-India.

The first issue is that mobile telephony growth in the country is today largely being driven and is dependent upon imports. The share of mobile and other telecommunications equipment in the country’s total import basket is continually increasing and currently stands at 26.4%. The share of Chinese products in this basket is continually rising and its share has increased from 64.3% in 2012-13 to 69.4% in 2016-17.

The second issue is that manufacturing value added (MVA) by Indian manufacturers is relatively small mainly due to high dependence on imported components. Considering increase in mobile penetration from current levels and large dependency on imports, the role of mobile and telecommunications equipment is crucial under the Government of India’s Make in India initiative.

The third issue is that mobile technology innovators, who are also the Standard-Essential Patent (SEP) owners, have often held the view that they do not make sufficient economic gains for their investments in research and development (R&D). On the contrary, mobile manufacturers state that the royalty claims on use of licensed technologies is too high.

The royalty yield of the 10 selected companies is in the range of 3.35% to 2.64% and shows a declining trend between years 2013 and 2016 suggesting that the royalty revenue of license holders has remained stagnant but smartphone sales in volume and value have increased over the years. R&D expenditure of the mobile license holders is in the range of 10.3% and 35.8% of their total revenue with a median of 21.9%, which is among the highest when compared with other industries.

Standardisation and innovation have been the cornerstones of the sustained growth momentum of the mobile telephony in the last three decades. With the onset of 5G and the rapid growth of Internet of Things (IoT), Machine to Machine Communications, Artificial Intelligence, etc and applications like smart cities on the anvil, the need for sustained industry effort on these fronts  is required.

Mobile Telephony’s and Communication Equipment’s Contribution to India’s Economic Prosperity

The total direct economic contribution of the mobile telephony to the Indian economy is estimated to be ?2,520 billion, which is about 1.75% of the Indian GDP for the year 2015.[1]   Linkage with a host of other industries leads to indirect and induced effects on the economy, which we measure by using the ‘Input-Output (I-O) Analysis’ methodology developed by Nobel laureate, economist Wassily Leontief. As per our analysis, the output multiplier results are:

Mobile phones with a manufacturing value added (MVA) of 18.3% and corresponding value addition multiplier effect of 5.89 implies that the total value addition to the economy due to increase in demand for mobiles will be significant. Hence, mobile phones require greater attention under “Make in India” to increase the contribution of the manufacturing sector to the GDP.

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