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Tuesday, July 23, 2024

Lower tariffs and duties, components PLI to attract global value chains to India: ICEA

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In Short:

India Cellular and Electronics Association (ICEA) recommends rationalizing duties on mobile phones, reducing input tariffs, and releasing a PLI scheme to attract global value chains and increase electronics production. India has the highest input tariffs compared to China and Vietnam. To sustain growth, ICEA suggests reducing duty on key components. India’s electronics manufacturing has reached $115 billion in FY24, with mobile phones contributing significantly to exports.

India Cellular and Electronics Association Recommends Duty Rationalisation for Mobile Phones

India should rationalize duties on mobile phones and sub-assemblies, reduce input tariffs, and release a production-linked incentive (PLI) scheme for building a components ecosystem to attract global value chains (GVCs) to the country. This recommendation, along with others, has been put forth by the India Cellular and Electronics Association (ICEA) for the Union Budget 2024-25.

Analysis of Input Tariffs

ICEA’s study of input tariffs on smartphones found that India continues to have the highest tariffs compared to countries like Vietnam and China. India’s simple average MFN tariff for inputs is 7.4%, significantly higher than China’s effective zero tariffs and Vietnam’s 0.7% FTA-weighted average tariffs.

Comparison of Tariffs Across Countries

As per ICEA’s findings, India has higher MFN tariffs for a majority of the HSN lines compared to China and Vietnam.

Recommendations for Duty Reduction

To attract GVCs and increase the scale of production, ICEA recommended reducing tariffs on components, bringing down significant costs. The association further suggested a reduction in India’s seven tariff slabs for the mobile sector to four slabs by 2025 – 0%, 5%, 10%, and 15%.

Additionally, ICEA called for the elimination of tariffs on sub-assembly parts and inputs, like PCBA parts, connectors, and camera modules, stating that these tariffs don’t serve any purpose and only increase costs and complexity.

Industry Impact

India’s electronics manufacturing output has reached $115 billion in FY24, with $29.1 billion in electronics exports, making electronics the fifth-largest export category from the country. Mobile phones alone contributed over 54% of this export amount, with production at $51 billion in FY24. Over the past decade, mobile phone production has increased significantly, leading to a decrease in import dependency.

In conclusion, ICEA’s recommendations aim to boost electronics production and exports in India, making it a more competitive player on the global stage.

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