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Mobile telephony contributes Rs 2,520 billion to the Indian economy, says BIF

January 11, 2018

According to a report released by the Broadband India Forum (BIF), the total direct economic contribution of the mobile telephony to the Indian economy is estimated to be Rs 2,520 billion, which is about 1.75 per cent of the Indian GDP for the year 2015. Linkage with a host of other industries leads to indirect and induced effects on the economy.

Mobile phones with a manufacturing value added (MVA) of 18.3 per cent 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 economy.

The report looks at the key factors that will provide greater push to the Make in India initiative in this sector. 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 the Make in India initiative.

Firstly, 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 per cent. The share of Chinese products in this basket is continually rising and its share has increased from 64.3 per cent in 2012-13 to 69.4 per cent in 2016-17.

Secondly, MVA by Indian manufacturers is relatively small mainly due to high dependence on imported components. Considering the increase in mobile penetration from current levels and large dependency on imports, the role of mobile and telecommunications equipment is crucial under the Make in India initiative.

Thirdly, mobile technology innovators, who are also the standard-essential patent owners, have often held the view that they do not make sufficient economic gains for their investments in research and development. On the contrary, handset manufacturers’ state that the royalty claims on use of licensed technologies is too high. The study estimated the royalty yield by analysing the intellectual property rights revenues of 10 global companies, which includes major mobile technology innovators and licensors as a percentage of the mobile sales in the global settings.

The royalty yield of the 10 selected companies is in the range of 3.35 per cent to 2.64 per cent and shows a declining trend between 2013 and 2016. This suggests that the royalty revenue of license holders has remained stagnant but smartphone sales in volume and value have increased over the years. Research and Development expenditure of the mobile license holders is in the range of 10.3 per cent and 35.8 per cent of their total revenue with a median of 21.9 per cent, 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, 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.

Commenting on the report, T.V. Ramachandran, President, Broadband India Forum said, “The study takes a much needed and critical look at the mobile telephony sector from the prism of key policy goals that assess whether the Make in India initiative in this sector is a success. With an increasing number of foreign manufacturers, now manufacturing in India, Indian companies must be willing to step up their innovation and research and development efforts to remain competitive in their own market. India’s domestic mobile handset manufacturers remain largely reliant upon the innovations and standards set up by the international players and organisations. By stepping up its innovative framework the Indian mobile industry will be better placed to contribute to the global standardisation process. This will also determine its role in the upcoming 5G ecosystem that promises to be truly transformational and one that the government intends to deeply integrate with the flagship Make in India programme.”

 

 
 

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