iPhone prices in India vs iPhone prices in USA: Former RBI Governor explains why iPhones are expensive in India

Former RBI Governor Raghuram Rajan has questioned the implications of the Centre’s Production Linked Incentive (PLI) scheme. As per the economist, the PLI scheme is based on the premise that India manufactures too little. To elaborate this, Rajan gave the example of the cell phone industry to make his point. Custom duties on mobile imports […]

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Former RBI Governor Raghuram Rajan has questioned the implications of the Centre’s Production Linked Incentive (PLI) scheme. As per the economist, the PLI scheme is based on the premise that India manufactures too little. To elaborate this, Rajan gave the example of the cell phone industry to make his point. Custom duties on mobile imports were increased by 20 percent in 2018, increasing domestic prices of mobiles.

“First, custom duties on mobile imports were increased to 20 percent in April 2018. This immediately increases domestic prices of mobiles, allowing producers to charge Indian customers more. For example, an iPhone 13 Pro Max is available for under Rs 92,500 in Chicago, US, inclusive of taxes while the same model with identical specs costs Rs 1,29,000 in India, a markup of nearly 40 percent,” he noted.

Rajan noted that the government will give a 6 percent subsidy to the manufacturers even if they import all parts from abroad and assemble them in India. “They (manufacturers) get the 6 percent subsidy on the invoice price,” he mentioned. “Even if they go up to the typical 17-25 percent value added of cell phone manufacturers in India, they get a handsome subsidy of 24 percent -35 percent. In addition, states further add to this bounty through state waivers (about 9% of the price), power, land, and capital expenditure subsidies”.

“The real problem is that we are still trying policy shortcuts. They are no substitute for longer term tasks like enhancing human capital investment, creating a simple but fair land acquisition process, ceasing the constant rejigging of tariffs and taxes, that make it hard for producers to invest, and strengthening infrastructure. Nevertheless, we are rolling out the PLI scheme widely. Perhaps the government should first pause and first assess whether it works?,” Rajan said.

In addition, Rajan also mentioned that the PLI scheme has also not helped in boosting exports much. The economist said, “In the last third of 2019 (before PLI was introduced and before Covid), exports were $1.6 billion and imports $4.4 billion for a net deficit of $2.8 billion. In the last third of 2021 (after PLI was introduced), exports were $2.7 billion and imports $5.2 billion for a net deficit of $2.4 billion”.

To recall, Apple recently launched the iPhone 14 series. The new iPhone 14 starts at Rs 79,900, while the iPhone 14 Plus starts at Rs 89,900. Pre-order availability for the iPhone 14 will become available starting September 16, while the iPhone 14 Plus will hit the markets on October 7. In the US, the iPhone 14 starts at $799, while the iPhone 14 Plus at $899.

The new iPhone 14 is incrementally better than the iPhone 13. The notch is still there and even the processor — for the first time in Apple’s history — is the same as before. Although Apple says the new A15 Bionic has a six-core CPU and a better GPU that offers 15 percent better graphics. However, when compared with the new iPhone 14 Pro and iPhone 14 Pro Max, the iPhone 14 series falls short of high performance.

The notch itself is also what makes the standard iPhone models dramatically different from the Pro models. Looks-wise, the iPhone 14 series has the notch while the iPhone 14 Pro series uses what Apple calls a “dynamic island.” It, however, essentially is a new pill-plus-hole cutout. The new iPhone 14 models, however, are slightly thinner and use recycled materials as Apple continues with its efforts toward the environment. The iPhone 14 has a 6.1-inch OLED display while the iPhone 14 Plus has a 6.7-inch screen.

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