The Ministry of Electronics and Information Technology (MeitY) is reportedly formulating a proposal to slash import duties on premium smartphone components, potentially including camera parts, with the anticipation that it will be incorporated in the upcoming Union Budget 2024-25. Government officials have indicated that the move is under consideration to address the demands of the electronics industry in India.
Exploring Incentives: Camera Parts in Focus
While specific details regarding the extent of incentives remain unclear, there are suggestions that the proposal may encompass camera components for high-end smartphones. The final decision will be made by the finance ministry post the finalization of the budget, scheduled for release on February 1.
Addressing Industry Concerns: A Response to Tariff Disparity
The proposal aligns with the recent concerns raised by the Indian Cellular and Electronics Association (ICEA), which conducted a study indicating that India imposes a considerably higher average import tariff of 8.5%, compared to China’s 3.7%, on input components. The ICEA urged the government to streamline import tariffs for mobile components, advocating for three slabs of 0%, 5%, and 10%. Furthermore, it sought a reduction in import duties for specific components like camera modules and chargers, which currently attract tariffs ranging from 2.5% to 20%.
Local Manufacturing Drive: Aiming for Self-Reliance
The move to potentially cut import duties aligns with the Indian government’s broader push for local manufacturing and value addition, as evident through initiatives such as Make in India and production-linked incentive (PLI) schemes. In the Union Budget 2023, Finance Minister Nirmala Sitharaman had announced a reduction in customs duty on camera lenses to 2.5%, signaling the government’s commitment to spurring local manufacturing.
Changing Landscape: Decline in Import Dependency
India’s domestic smartphone manufacturing industry witnessed a significant shift in import dependency, plummeting from 78% of revenue in 2014-15 to a mere 4% in 2022-23. Union Minister Ashwini Vaishnaw highlighted that over 99% of mobile phones used in India are locally manufactured. The local industry is anticipated to produce nearly $50 billion worth of mobile phones in FY24, with smartphone exports reaching $11.1 billion in FY23 and an expected surge to $15 billion by March 2024.
Global Manufacturers’ Footprint: Apple and Google’s Expanding Presence
Premium smartphone manufacturers like Apple are actively scaling up their production in India. Apple, having emerged as the world’s second-largest manufacturer of mobile phones in 2023, produced iPhones worth INR 1 Lakh Cr in India and aims to further ramp up production by over five times to reach approximately $40 billion by 2027. Google has also revealed its plans to manufacture Pixel smartphones in India, aligning with the industry’s trajectory towards self-reliance and increased global exports.
