Chennai: Amidst reports about the government considering tariff cuts on electronics and mobile phone imports, a private think tank finds that it would harm development of the component ecosystem, discourage investment, and hurt the goal of self-reliance. Instead, it recommends setting up component hubs close to ports to reduce delays and warehousing costs.
A few industry groups have been pushing for further import tariff cuts on smartphone components in the 2025 Union Budget. Reports suggest that the government too is considering the demand.
However, this could harm India's growing local manufacturing ecosystem and long-term ambitions in electronics, finds GTRI.
According to GTRI, such a move will disrupt local manufacturing. Tariff cuts would harm India's developing component ecosystem, discourage investment, and hurt the goal of self-reliance.
Current export schemes already allow duty-free imports for manufacturing exports, benefiting firms like Apple and Samsung. Further cuts won't increase exports.
Cutting tariffs could also weaken the manufacturing framework created with policies that promote local production through tariffs, incentives, and phased programs. Lower tariffs could also encourage unsustainable assembly-based operations, as seen in past policy failures.
Duty cuts would make local firms uncompetitive, resulting in job losses. The mid and low-end segments of the industry depend on local components and provide employment.
Electronics imports have risen significantly, and further tariff cuts would worsen this trend, increasing India's reliance on foreign suppliers. India’s electronics component imports are rising. The country’s electronics component imports increased by 36.7 per cent in FY2024.
Instead of cutting tariffs, GTRI recommends setting up component hubs near ports to reduce import delays and warehousing costs. These hubs could be Bonded Cargo Warehouses, allowing companies to import and store components without paying duties upfront. This approach, used by countries like Vietnam and China, would support local manufacturing and reduce import dependency.
