Lower input tariffs and components PLI to attract global value chains to India, says ICEA

According to the India Cellular and Electronics Association (ICEA), India should rationalise 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, scale up electronics production and exports in the next five years, and compete effectively with advanced nations like China and Vietnam.

As per the recommendations released by ICEA for the Union Budget 2024-25, these recommendations are based on a seven- country study on input tariffs on smartphones analysing the impact of high tariffs on India’s mobile phone manufacturing and export competitiveness.

As per the study, India continues to have the highest input tariffs, significantly higher than Vietnam and China. The study stated that India’s simple average most favoured nation (MFN) tariff for inputs is 7.4 per cent, compared to China’s effective zero tariffs offered in bonded zones and Vietnam’s 0.7 per cent fair trade agreement (FTA)-weighted average tariffs (WAF).

The study highlighted that the highest MFN tariffs for China are at 10 per cent and for Vietnam is at 6.7 per cent. By contrast, India has many tariff lines with higher tariffs. In addition, 97 per cent Vietnam’s WAF are between zero to five per cent, while China’s tariff lines are in the range of 56 per cent.

ICEA further recommended that all tariff lines that increase costs significantly, including components of complex sub-assemblies, should be brought down to zero to attract GVCs and increase the scale of production. In addition, it urged that India’s seven tariff slabs for the mobile sector should be reduced to four slabs, 0 per cent, 5 per cent, 10 per cent, and 15 per cent, by 2025.

As per ICEA, the reduction in duty from 20 per cent to 15 per cent on printed circuit boards (PCBA), charger adapter and mobile phones, as well as the reduction in duty on microphone/receiver from 15 per cent to ten per cent will not impact the current domestic manufacturing.