In an effort to move ahead of China and Vietnam, the electronics industry requested the Central government on Tuesday to investigate reducing input tariffs in the next budget and expanding domestic manufacturing.
The electronics industry’s suggestions, which are meant to draw Global Value Chains (GVCs) to India, are founded on a thorough “Tariff Study” that looked at input tariffs for smartphones across seven countries, analyzing the effects of high tariffs on India’s export competitiveness and ability to manufacture mobile phones.
Vietnam has FTA-weighted average tariffs of 0.7%, whereas China offers effective zero tariffs in bonded zones. India’s simple average most-favored nation (MFN) tariff for imports is 7.4%.
Pankaj Mohindroo, Chairman of the India Cellular and Electronics Association (ICEA), stated that “matching the competitive tariff regimes of China and Vietnam is required to sustain the tremendous growth in mobile phone production and exports.”
“Current high tariffs increase manufacturing costs in India by 7-7.5 per cent on the bill of materials (BoM), deterring local ecosystem development, hampering exports, and adversely impacting job creation,” Mohindroo stated.
In order to bring India’s input tariffs down to the level of China and Vietnam’s competitiveness, the study suggests a glide path.
“Any revenue foregone under this tariff reduction would be more than compensated by the additional revenue generated from higher affordability, increased production, sales of smartphones and higher economic activity following job creation,” the results indicated.
The industry suggested bringing down to zero all tariff lines that result in a large increase in expenses, including parts of complicated subassemblies.
“India’s seven tariff slabs for the mobile sector should be reduced to 3+1 slabs – 0 per cent, 5 per cent, 10 per cent and 15 per cent by 2025,” they stated.
The drop in duty on mobile phones, charger adapters, and printed circuit board assemblies (PCBAs) from 20% to 15% and the reduction in duty on microphones and receivers from 15% to 10% “will not affect current domestic manufacturing.”
With $29.1 billion in electronics exports, electronics manufacturing production in India hit a record-breaking $115 billion in FY24, ranking as the country’s fifth-largest export category.
Almost 54% of total export came from mobile phones alone, which were produced for $51 billion in FY24.
