India imposes the highest tariffs on electronics inputs compared to other competing economies, exacerbating its cost disadvantage, according to a study conducted by the India Cellular and Electronics Association (ICEA).
ICEA examined input tariffs in the electronics sector across five nations: India, China, Vietnam, Thailand, and Mexico. It analyzed 120 key components, IANS reported.
The findings indicate that India’s tariffs are significantly higher than Vietnam’s (considering free trade agreement tariffs) for up to 98 percent of the lines and 90 percent higher than Thailand’s for the same lines.
The competing economies have roughly double or more zero tariff lines compared to India. Specifically, India’s Most Favored Nation (MFN) tariff average stands at 9.7 percent, while China’s average is only 3.2 percent.
The study highlights that over 80 percent of Vietnam’s imports for the 120 tariff lines fall under free trade agreements, resulting in a significantly lower average tariff of close to 1 percent for Vietnam. This demonstrates how tariffs, instead of fulfilling their intended purpose, actually hinder cost efficiency, domestic production, and exports.
High tariffs are effective during an import substitution phase but become counterproductive when a sector like electronics transitions into export-led growth. India’s mobile phone exports witnessed a remarkable increase, with a nearly 100 percent rise to $11.1 billion, and electronics exports grew by 56 percent to $23.6 billion by March of this year.
In 2022, India reduced the import duty on lens glass of cameras for smartphone components from 2.75 percent to zero, while tariffs on other components remained unchanged and generally higher than those of competing economies.
The electronics industry has appealed to the Department of Revenue to lower tariffs on mobile manufacturing inputs, as the current tariffs have become obsolete in their usefulness.
The report emphasizes that the mobile phone sector has transformed from being 78 percent import-dependent in 2014 to achieving self-reliance (99.2 percent of phones sold in India are domestically made) by 2021, and is now focusing on export-led growth, with exports amounting to Rs 90,000 crore by March 2023.
Additionally, the electronics industry has requested a glide path for input tariffs over the next two years to align with those of Vietnam and China.
