India Considers Import Duty Cuts: Boosting Competitiveness in High-End Mobile Manufacturing

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New Delhi, 12th January 2024- In a strategic move to enhance the competitiveness of its mobile phone manufacturing sector, India is contemplating a reduction in import duties on components crucial for the production of high-end mobile phones. This potential decision, as disclosed by two government officials, aims to benefit companies such as Apple and bolster the country’s exports.

Companies operating in the mobile phone manufacturing sector are advocating for a reduction in import duties on approximately a dozen components. The objective is to diminish the production costs of smartphones in India, allowing companies to compete more effectively with regional rivals like China and Vietnam.

The Ministry of Electronics and Information Technology in India is actively supporting the initiative by considering an extension of duty cuts. A government official revealed that the proposal is expected to be presented during the upcoming Union Budget scheduled for February 1. However, the exact number of components included in the ministry’s proposal remains unclear, pending a decision by the Finance Ministry during the finalization of the budget.

As of now, India’s Ministry of Electronics, Finance Ministry, and Apple have refrained from providing any official comments on the potential duty cuts. Additionally, it has been disclosed that the budget may incorporate a proposal to impose import duties on components such as camera parts for high-end phones.

The India Cellular and Electronics Association (ICEA) is urging a reduction in import duties on mobile phone components, specifically camera modules and chargers, from the current 2.5% to 20%. The association notes that India’s levy is the highest among six manufacturing countries, including China, Vietnam, Mexico, and Thailand. It emphasizes that unless these duties are decreased, the growth of India’s mobile phone exports might decelerate.

Industry data indicates a substantial growth in mobile phone exports, doubling to $11.1 billion in the financial year 2022/23 compared to the previous year. Government incentives to support local manufacturing have played a crucial role in this growth. The industry anticipates exports to further increase to $15 billion in the 2023/24 financial year. Major players in India’s mobile phone export market include Apple, Samsung from South Korea, and Xiaomi from China.

While Apple currently assembles iPhones in India, the tech giant is exploring opportunities to expand production to include iPad and AirPods. This strategic move aims to diversify manufacturing away from China. India’s trade minister previously stated Apple’s intent to increase its manufacturing in India to 25% of its global total, indicating a significant boost in investment.

In the 2023/24 annual budget, Finance Minister Nirmala Sitharaman eliminated the 2.5% customs duty on select parts of mobile camera phones. This move was part of an effort to increase the production of high-end mobile phones assembled in India, aligning with the government’s commitment to promoting local manufacturing.