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ICEA Urges Reduced Input Tariffs To Boost Electronics

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A report by ICEA recommends India align tariffs with Vietnam and China by FY 2026-27 to attract global value chains.

In a recently published report, the India Cellular & Electronics Association (ICEA) proposed lowering input tariffs to foster a robust components ecosystem before the Union Budget.

The report titled ‘A Comparative Study of Import Tariffs Impacting India’s Competitiveness in Mobile Manufacturing and Exports’ recommended that to enhance export competitiveness, India must scale up production and integrate into global value chains (GVCs), necessitating lower tariffs on components and sub-assemblies.

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This can be achieved by reducing cost-increasing tariff lines to zero for complex sub-assembly components and simplifying India’s complex tariff structure into three streamlined slabs (0%, 5%, and 10%) by 2025.

Comparing tariffs on components across India, China, Vietnam, and competitors like Malaysia, Mexico, Thailand, and the Philippines, India showed higher tariff peaks and fewer zero tariff lines than China and Vietnam.

The report highlighted that this impacts India’s global mobile phone market competitiveness, while Vietnam’s lower tariffs under Free Trade Agreements further challenge India’s production costs and international standing.

Starting in FY 2024-25, India may align tariffs competitively, reaching levels comparable to Vietnam and China by FY 2026-27 to bolster competitiveness, scale, and exports.

ICEA proposed reducing the “Others” (electronics) category tariff from 15% to 10% to prevent misinterpretation and legal disputes. This adjustment will bolster India’s global competitiveness for smartphones and their parts, starting in FY 2024-25.

Currently, India’s average MFN tariff (8.5%) exceeds that of China (3.7%) and Vietnam (0.7% under FTAs). Despite increasing tariffs on sub-assemblies since 2016, India has not achieved substantial localisation beyond PCBAs, battery packs, and chargers due to complex technological requirements.

Unlike China and Vietnam, which have consistently reduced tariffs, India’s higher tariffs contribute to a Bill of Materials (BoM) cost 6-7% above competitors.

ICEA’s report states, “A stable tariff policy along with low tariffs, is essential to encourage investment in domestic manufacturing of sub-assemblies and components, as demonstrated by China’s experience. Thus, India should not adopt a strategy focused on increasing tariffs with each Budget. It should focus on tariff reduction and rationalisation of components to support the growth of local manufacturing rather than attempting to produce all components domestically.”

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