CMRs view in response to the all time high Rs 745 Cr allocated for incentives under MSIPs and EDF for Union Budget 2017-18

Finance Minister Shri Arun Jaitley while presenting Union Budget for 2017-18 announced a slew of measures to push important cogs of the economy.  Electronics manufacturing in general and Mobile Phones in particular have become important contributors to the economy in recent years.  Mobile phones have in fact gone beyond and are now being seen as the hub of the Digital Nation that India is in making.

As per CMR estimates, in 2017, of the 270 million (27 Cr) mobile handsets to be shipped, 200 million (20 Cr) will be made out of India.  Also from the allocated Rs 745 Cr incentives for electronics manufacturing in India, around 70% is likely to go to Mobile Handset manufactures, basis the proportion of electronics being produced out of India.

This means, as per the all time high allocation, Government will incentivize Rs 26 per handset to be made out of India.  Against this, at an average selling price of Rs 5,138, government collects revenues of Rs 617 per handset by way of various duties and taxes.  That is whopping 24 times of the incentive allocated per handset.

CMR completely appreciates the fact that this is an all time high allocation and a defined one for the first time that brings in more clarity about what one can expect as incentives.  However, the kind of fillip everybody wants for the mobile handset industry looking at the potential in this category of electronics, the incentive could have been more exciting and encouraging one.

Commenting on the incentives announced, Faisal Kawoosa, Principal Analyst for Telecom and ESDM at CMR said, “Any incentive is welcome underlining the intent of the government, and the all time high allocation is a great indicator in that direction.  However, looking at the potential as well as the success story Mobile phones have exhibited in very short span of time in India, an extra mile effort would have been ‘icing on the cake’.”