India budget: cuts import duties on key components in mobile phone production

India has eliminated import duties on certain key components used in mobile phone production, Finance Minister Nirmala Sitharaman said in the annual budget.

Kazakhstan mobile network
Kazakhstan mobile network

This move is expected to support local manufacturing efforts and benefit major players such as Apple and Xiaomi.

Over the past six years, India’s electronics production has more than doubled to reach $115 billion in 2024, making the country the world’s second-largest mobile phone manufacturer. The decision to remove import duties aligns with the government’s objective of strengthening India’s position in the global electronics supply chain, Reuters news report said.

Apple emerged as the market leader in India’s smartphone industry in 2024, capturing 23 percent of the total revenue, followed closely by Samsung at 22 percent, as per research firm Counterpoint. The import duty cuts apply to essential components like printed circuit board assemblies, camera module parts, and USB cables, which were previously taxed at 2.5 percent.

By eliminating these duties, India aims to enhance its competitive edge in the global trade environment, especially in light of potential disruptions caused by U.S. President Donald Trump’s tariff policies. While Trump’s administration continues to push for reshoring manufacturing to the U.S., India seeks to capitalize on trade tensions between the U.S. and China to increase its participation in global supply chains.

The Indian IT ministry had previously warned that the country risked losing its standing in smartphone exports to China and Vietnam if it failed to lower tariffs and attract global companies. Last year, Reuters reported that Indian authorities were concerned about maintaining the country’s appeal to international manufacturers, which necessitated a review of its customs duty structure.

Nirmala Sitharaman’s budget from the previous year had already outlined a plan to rationalize and simplify tariffs, making trade easier and addressing inverted duty structures, where tariffs on raw materials or intermediate goods were higher than those on finished products. India’s intricate tariff system has often been criticized for creating inefficiencies in local production and leading to disputes among industry stakeholders.

Prashant Singhal, EY India’s Markets and Telecommunications Sector Leader, highlighted that the Union Budget 2025 places significant emphasis on digital infrastructure development. The BharatNet initiative, which aims to expand high-speed internet access to rural areas, has received a substantial budget increase of 238 percent year-on-year, reaching INR 22,000 crores for FY26.

This funding will facilitate internet connectivity for government-run secondary schools and primary healthcare centers. Additionally, local handset manufacturing is expected to benefit from the removal of the 2.5 percent Basic Customs Duty (BCD) on specific inputs, parts, and sub-parts. With India producing 330 million mobile handsets in FY24, amounting to INR 4.4 lakh crore, this policy change is expected to lower handset prices.

Another key aspect of the budget is the rationalization of BCD on carrier-grade Ethernet switches, reducing it from 20 percent to 10 percent, aligning it with non-carrier-grade switches. This adjustment is anticipated to minimize classification disputes and litigation while also lowering costs for telecom operators.

The reduction in customs duties on these switches will further accelerate the deployment of high-speed networks, improving enterprise communication and data center connectivity. Notably, the FY26 budget also reflects a 33 percent reduction in projected telecom sector revenue compared to FY25. This decrease suggests that spectrum usage charges and one-time spectrum fees for telecom operators could be lower, reflecting the industry’s current sufficiency in 4G and 5G spectrum. Consequently, a spectrum auction is unlikely in FY26.

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