The Global Trade Research Initiative (GTRI) has warned that any reduction in customs duty on smartphone components in the upcoming Union Budget for FY26 could substantially impact India’s burgeoning electronics ecosystem. The think tank highlighted risks such as discouraging investment, increasing imports, and making local firms uncompetitive, which could ultimately lead to job losses.
India’s smartphone manufacturing sector is widely regarded as a success story under the ‘Make in India’ initiative. In FY2023-24, the sector achieved production worth $49.2 billion, with exports contributing $15.6 billion, making smartphones the fourth-largest export category after diesel, aviation fuel, and polished diamonds. However, industry groups advocating for tariff cuts on smartphone components could undermine this progress, according to GTRI.
GTRI founder Ajay Srivastava outlined six key risks associated with reducing import duties. He emphasized that such measures could harm India’s developing component ecosystem, discourage investments, and derail the country’s goal of self-reliance in electronics manufacturing. He also pointed out that existing export schemes already permit duty-free imports for manufacturing exports, rendering further tariff cuts unnecessary.
“India’s success in smartphone manufacturing is a result of policies that promote local production through tariffs, incentives, and phased programs. Reducing tariffs could weaken this framework and lead to unsustainable, assembly-based operations,” Srivastava stated.
India’s smartphone production is primarily divided into three categories: premium phones (20% of production), mid-range phones (30%), and low-end phones (50%). Local components are heavily utilized in mid- and low-end phones, accounting for 70% and 50% of their production, respectively. Key components manufactured locally include printed circuit boards (PCBs), display modules, camera modules, battery packs, chargers, wiring harnesses, microphones, speakers, SIM card holders, and USB connectors.
GTRI noted that while the local manufacturing ecosystem is still evolving, it requires protection to continue its growth. Reducing import tariffs would allow duty-free imports of these components, making it challenging for domestic firms to compete and potentially forcing them out of business.
The mid- and low-end smartphone segments, which depend heavily on locally produced components, provide substantial employment opportunities. According to GTRI, tariff reductions could lead to significant job losses as local firms would struggle to compete with imported components.
Countries like South Korea, Japan, and Taiwan have developed specialized local ecosystems for high-value components, creating sustainable jobs and maintaining robust electronics industries. GTRI recommends India follow a similar approach, focusing on nurturing its local manufacturing base rather than increasing reliance on imports.
India’s electronics component imports have surged from $15.8 billion in FY19 to $34.4 billion in FY24. Further tariff cuts would exacerbate this trend, increasing dependency on foreign suppliers and leaving the country vulnerable to global supply chain disruptions, GTRI warned.
The think tank proposed setting up component hubs near ports to reduce import delays and warehousing costs, a strategy successfully employed by countries like Vietnam and China. This approach would strengthen India’s local manufacturing capabilities while reducing reliance on imports.
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