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Budget expectations: Ajjay Agarwal, Chairman and Managing Director, MAXX Mobiles

February 23, 2011
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We hope that the government will lend support to domestic handset companies to set-up independent local manufacturing facilities by promoting favourable taxation and subsidy policies. We think this is important because of the growing demand for mobile handsets in India. Even if a fraction of this demand is met by local manufacturing this could generate employment opportunities and also save valuable foreign exchange within the country. 

From a business perspective, local manufacturing of mobile handsets not only acts as a safeguard against possible barriers to cost-effectively importing handsets, but also ensures that domestic handset companies will be able to better serve Indian consumers, by reacting to changing trends and needs faster while ensuring that quality is maintained.

For example, manufacturing of mobile accessories enjoy certain benefits in the form of zero custom and excise duties on the import of raw materials. The government should consider extending such support to players in the handset industry as well. 

Further, an import duty of merely 1.6 per cent is levied on mobile handsets, makes it lucrative for many local brands to import handsets, rebrand them and sell them in the Indian market at extremely cheap prices. However, there need to be safeguards and quality checks so that sub-standard products are not brought into the country and to prevent dumping. This can also have a positive impact on the environment as well by preventing dumping of hazardous products.

Another key aspect that we hope the Government will consider is the lack of uniform rates of VAT across the country. We hope that the implementation of the GST will be a step in correcting this discrepancy.

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