The Indian government’s recent decision to reduce import duties on crucial components used in mobile phone manufacturing is set to bring about a significant change in the cost dynamics of smartphones in 2024.
Reduced Import Duties:
In a move aimed at bolstering the mobile phone manufacturing ecosystem, the Centre has slashed import duties on components from 15% to 10%. This reduction applies to essential elements such as battery enclosures, primary lenses, rear covers, and various mechanical components. The move is expected to benefit both the manufacturing and export sectors.
IT Minister Ashwini Vaishnaw expressed appreciation for the customs duty rationalization, citing increased clarity and certainty for the industry. He acknowledged the positive impact this step would have on strengthening the mobile phone manufacturing ecosystem.
Industry insiders, including major players like Apple, have been advocating for reduced import duties on critical components. The proposed reduction in duties for 12 components is anticipated to lower production costs, fostering a more competitive environment vis-a-vis neighbouring competitors like China and Vietnam.
The Global Trade Research Initiative (GTRI) has cautioned against reducing import duties, arguing that maintaining the current structure could strike a balance in industry growth and long-term development. The think tank suggests that Indian manufacturers should pay duties on smartphones sold within the country, while exports should be exempted.
Contrarily, the India Cellular and Electronics Association (ICEA) supports the reduction in import duties on mobile phone components. This move is seen as crucial in boosting domestic production, promoting exports, and supporting indigenous manufacturing.
Impact on Domestic Production and Exports:
The reduction in import duties is expected to significantly boost domestic production and exports of mobile phones. Finance Minister Nirmala Sitharaman’s earlier decision to reduce customs duties by 2.5% on various camera phone components in the budget for 2023-24 also aligns to scale up mobile phone production.
Rising Smartphone Exports:
Notably, the export figures for Indian smartphones saw a remarkable increase from $7.2 billion in 2022 to $13.9 billion in 2023. The mobile phone manufacturing sector remains a high-performing one, especially under the nation’s flagship PLI (production-linked incentive) scheme.
Positive Takeaway:
With over 98% of smartphones sold in India being locally manufactured, the reduced import duties on components signify a positive stride towards making smartphones more affordable for consumers in 2024. The move is not only expected to benefit the industry giants but also encourage indigenous manufacturing and strengthen India’s position in the global smartphone market.
