Modi Government Slashes Import Duty on Mobile Phone Components Ahead of Interim Budget

In a strategic move preceding the Interim Budget, the Modi government has announced a significant reduction in import duties on mobile phone components, aiming to fuel exports from India, the third-largest economy in Asia. According to reports from Reuters, the government has decided to cut the import duty on components crucial for manufacturing mobile phones, lowering the rate from 15% to 10%.

The finance ministry disclosed that the reduced import duties would apply to various components, including battery covers, main lenses, back covers, and other plastic and metal mechanical items, bringing the rate down to 10%.

Earlier this month, a Reuters report hinted at India's contemplation of reducing import duties for essential components used in the production of high-end mobile phones. The latest announcement aligns with this anticipation, marking a strategic effort to enhance the competitiveness of India's smartphone manufacturing sector.

However, the decision has sparked contrasting opinions within the industry. The Global Trade Research Initiative (GTRI) recently recommended against reducing import duties on electronic components used in smartphone manufacturing in the upcoming budget. The think tank argued that the existing tariff structure has effectively supported local manufacturing and cautioned that alterations could jeopardize the industry's growth. The GTRI suggested maintaining the current rates to strike a balance between industry expansion and long-term development in India's burgeoning smartphone market.

This stance differs from the India Cellular and Electronics Association's (ICEA) advocacy for import duty cuts on mobile phone components. The ICEA believes that such reductions could potentially lead to a 28% surge in domestic handset production, reaching USD 82 billion. This, according to the ICEA, would stimulate exports and fortify indigenous manufacturing.

The GTRI report proposed a nuanced approach where Indian manufacturers pay duties on smartphones sold within the country, while exports remain exempt from such duties. Additionally, the report acknowledged successful policy interventions like the production-linked incentive (PLI) scheme, contributing to India's smartphone industry's stellar performance. The PLI scheme offers cash incentives and supports local production of smartphones and their components, aligning with the government's broader strategy to boost self-reliance and competitiveness in the technology sector.