High tariffs impair India's global edge in smartphone sector: ICEA

The India Cellular and Electronics Association (ICEA) on Wednesday released a study of tariffs on smartphone input components that found India to have the highest tariffs amongst six other manufacturing competitors.

The study carried out by the premier electronics manufacturing industry body across seven countries, further underlines that the high tariff rates lead to increased costs, making it difficult for companies to join Global Value Chains (GVCs), ultimately reducing India's competitiveness among other countries. 

India’s simple average Most Favoured Nation (MFN) tariff for inputs is 8.5 per cent, higher than China’s 3.7 per cent, says the report.

Additionally, the Free Trade Agreement (FTA) weighted average tariff comparison between India and Vietnam shows that India’s simple average is at 6.8 per cent vis-à-vis Vietnam’s at 0.7 per cent.

 

“India has an immense opportunity to increase its competitiveness and large-scale manufacturing to address the global market and integrate into GVC by making our tariffs competitive vis-à-vis competing nations,” said Pankaj Mohindroo, Chairman, ICEA. 

India’s smartphone manufacturing has descended from 78 per cent import dependency in revenue terms in 2014-15 to only 4 per cent in 2022-23.

With more than 99 per cent of smartphones sold in India being assembled locally, India has now been producing more than the domestic demand, which presents a huge export opportunity for local manufacturers.

To tap into this, India needs large GVCs to shift production lines to the country and get local companies into the supply chains, for which the country needs to have a tariff regime that matches with the competing nations like China and Vietnam, the study explained.

"To achieve this target of high export, India needs more than just ambition; it requires a tangible shift of global value chains, bringing major production lines to India and integrating our businesses into the international supply web,” said Mohindroo.

The study identifies having too many slabs as another key issue in India’s tariff regime. “The highest tariffs for both China and Vietnam are 10 per cent maximum. By contrast, India has many more tariff lines, in addition to higher tariffs,” said the report.

“Higher tariffs of India result in an overall loss of competitiveness of about 6 to 7 per cent compared to Vietnam and China,” it further added.

The industry body demands identification and reduction of all tariff lines that incur significant costs, in order to increase India’s competitiveness in electronics manufacturing in the future.

Additionally, it also demands the simplification of the current complex tariff structure to only three slabs by 2025: 0, 5, and 10 per cent.