Tariff Reduction on Smartphone Parts Slated to be Disastrous

India’s smartphone industry has been a standout success, with production reaching $49.2 billion and exports $15.6 billion in 2023-24. Smartphones now rank as the country’s fourth-largest export, after diesel, aviation fuel, and polished diamonds. Despite this progress, some industry groups are advocating for further reductions in import tariffs on smartphone components. GTRI warns that such a move could jeopardize India’s long-term goals in electronics manufacturing.

The Global Trade Research Initiative (GTRI) has raised concerns over potential reductions in customs duties on smartphone parts in the forthcoming Union Budget for FY26. According to the think tank, such a move could negatively impact India’s growing smartphone manufacturing ecosystem, discourage investment, increase import dependency, and make local firms less competitive. This, in turn, could lead to significant job losses and undermine the progress achieved under the “Make in India” initiative.

"Instead of cutting tariffs, GTRI recommends setting up component hubs near ports to reduce import delays and warehousing costs. This approach, used by countries like Vietnam and China, would support local manufacturing and reduce import dependency," the think tank's founder, Ajay Srivastava, said.

Fourth, GTRI cautions that duty reductions might lead to unsustainable assembly-based operations rather than fostering comprehensive manufacturing capabilities. Fifth, the mid- and low-end market segments, which heavily rely on locally produced components, could be adversely affected, resulting in job losses. Lastly, local manufacturers would struggle to compete with cheaper imports, risking the industry's global competitiveness.

India’s success in smartphone manufacturing has been driven by a combination of tariffs, phased programs, and production-linked incentives (PLIs). GTRI emphasizes that weakening this framework could reverse the industry’s growth, encouraging unsustainable practices and threatening India’s position in the global electronics supply chain.

In conclusion, GTRI’s analysis highlights the need for policies that support long-term growth in India’s electronics sector. By focusing on strategic initiatives such as component hubs and maintaining the existing tariff structure, India can ensure the sustainability and competitiveness of its smartphone manufacturing ecosystem.