The PLI scheme for mobile phones was notified on April 1, 2020 
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The PLI scheme for mobile phones was notified on April 1, 2020 Rajeev Chandrasekhar, Minister of State for Electronics and Information Technology, on Thursday slammed former RBI governor Raghuram Rajan for his criticism of the production-linked incentive scheme for mobile phone manufacturing.
Rajan, the Katherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago's Booth School of Business, last month wrote an elaborate note on LinkedIn examining the Centre’s PLI scheme for mobile phone manufacturing and wondered "Is India really manufacturing mobile phones?".
The PLI scheme for mobile phones, which was notified on April 1, 2020, extends an incentive of 4 to 6 per cent on incremental sales (over the base year) of mobile phones that are manufactured in India to eligible companies, for a period of five years.
The government has claimed that the PLI scheme has led to increased exports of mobile phones.
Rajan and his co-authors, Rahul Chauhan and Rohit Lamba, had written that the import data shared by the government, even with accommodating assumptions, showed that net exports of phones remained negative.
This is because most components for mobile phone manufacturing continued to be imported, and assembling the phones in India alone added little value to phones.
He wrote assembling gives as little as 4 per cent of the manufacturing cost, and even smaller as part of the retail price.
Dr Rajan's paper, 'Has India really become a mobile manufacturing giant?', has also questioned if subsidies being paid to the companies under the PLI scheme and tax waivers are more than the value addition the mobile phone makers are doing in the country.
In his word-by-word rebuttal, Chandrasekhar accused the economist of using “false data” for his conclusions and claims.
Calling Rajan a repeat offender, Chandrasekhar said Rajan has “no pride, self-respect, or even dignity”, but he didn’t deny that assembly was a low value-addition process.
“This conclusion by itself is not rocket science,” he said, accusing the economist of using “false data” to draw subsequent conclusions.
Rajan, in his authored article, said that mobile phone exports took off from Q4 2021-22, when there was a commensurate rise in net imports of inputs. The imports of those mobile phone components reached $32.4 billion in the financial year 2023.
He said that by combining the number of exports, imports and net exports of final mobile phones, semiconductors, motherboards and other mobile parts, the net imports increased to $23.1 billion from $12.7 billion, which reflects that the country has become more dependent on imports during the PLI scheme.
Countering the claim, Chandrasekhar said: “This is the first lie. Mobile production utilises only part of the total key imports of $32.4 billion. Every other conclusion that follows is consequently flawed. The imports linked to mobile phone manufacturing are merely $22 billion out of the total $32.4 billion - only 65 per cent is used for total mobile manufacturing."
He wrote that the net foreign exchange outflow on account of mobile phone manufacturing for FY2023 is $10.9 billion, and not $23.1 billion, as highlighted by Dr Rajan in his post.
Chandrasekhar further added: “…as the component and sub-assembly ecosystem builds up, driven by scale and supported by exports, new jobs are created, value addition increases, and domestic companies join the global supply chain.”
“There are many benefits—some come early, and some later. That’s the nature of attracting supply chains,” he further explained.
Chandrasekhar also highlighted that Rajan intentionally chose 2018 as a starting point, and not 2014, which is "unbecoming both a gentleman and most certainly, an economist".
“If he had, he would have to admit that since then, mobile production is up nearly 1,400 per cent and mobile exports are up nearly 4,200 per cent. That certainly would not fit the narrative Rajan wants to build here," Chandrasekhar wrote in his post.
The minister added that the former RBI governor only highlighted two of the five years of the PLI scheme and not all five years as he made another attempt to mislead readers.
The minister added that the PLI scheme has created around 1,20,000 new direct jobs and nearly 2,50,000 new indirect jobs in 24 months.
He also said that the scheme led to an increase in tax collection to about Rs 1.01 lakh crore of incremental GST, of which around Rs 42,897 crore have already been collected as of March 31, 2023.
He added that companies and conglomerates like Tatas have now started component manufacturing.
"Large companies such as Tatas have now begun not just component manufacturing but will soon be manufacturing iPhones in India. Opportunity for Indian SMEs to join the global supply chain," the minister said.
He also wrote that Dr Rajan penned his post relying on advice from an unnamed industry executive, but didn’t mention his source. “Rajan should come out in the open and declare his sources,” Chandrasekhar wrote. “But that is usually asking for too much in a political hitjob article inspired by his leader Rahul Gandhi.”
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