With the domestic mobile phone market almost saturated, the industry is looking toward exports in a big way. The Minister for Communications and Electronics & Information Technology, Ashwini Vaishnaw expects mobile phone exports to touch USD 15 billion in FY24, from USD 11.1 billion in FY23, and USD 50 bn over the next few years. While 99 percent of the country’s requirement is met through indigenous production, only 25 percent of India’s mobile production was for the international market in FY23.
China and Vietnam dominate, with a combined nearly 85% of the USD 190 billion international market.
Attention needs to be drawn to the recommendations made by India Cellular and Electronics Association’s (ICEA’s) recommendations in June 2023 in the report, A comparative study of import tariffs in electronics 2023.
Overall, the importance of tariff rationalization increases with complex GVCs. The increase in scale and higher participation in GVCs takes time and will happen provided tariffs are rationalized.
A relatively larger scale is possible if export oriented rather than domestic market-oriented
operations are the focus. A tariff increase works against such a vision. Thus, it is recommended that;
a. Policy makers should be aware that different windows for exporters to import duty free inputs such as MOOWR, EOU, SEZ, Advance Authorisation and duty drawback, do not compensate exporters for increased tariffs on inputs. The imposition of tariffs orients a significant share of production towards the domestic market leading to higher prices for inputs as well as final products.
b. Tariffs need to be rationalized for achieving both scale and export objectives. Shifting of GVCs is much more likely when tariffs are rationalized.
c. The Government should engage in a detailed exercise on improving competitiveness vis a vis Vietnam and then accordingly make Indian tariffs more competitive with a view to reduce them.
d. Tariffs should include a consideration of India’s ambitions of self-sufficiency and transitioning to a global hub for manufacturing and exports. Furthermore, the government should also engage in industry wide consultation along with its nodal ministry before any tariffs are
e. Government should move to evidence-based tariff setting as the way forward, wherein
comparisons must be made with competing manufacturing economies such as China, Mexico, Vietnam, Thailand etc., as India is trying to acquire higher global market shares.
f. Duties which are styming the development of manufacturing as is the case in many areas like open cell assembly in colour TVs should be rationalized immediately.
- A review of all duties imposed in the past 5 years, their current relevance or irrelevance should be evaluated.
- As the Indian rupee has fallen against the dollar by nearly 11%, to retain competitiveness India must keep its tariff low.