Import duty cut to lower cost pressure, push exports: Industry

Import duty cut to lower cost pressure, push exports: Industry

On Tuesday, the government implemented a significant reduction in import duties on essential components crucial for mobile phone manufacturing, such as mechanics and display assembly, bringing the tariffs down to 10%. This move aligns with industry demands to enhance cost competitiveness and alleviate cost pressures faced by ecosystem vendors. The decision is expected to boost India's burgeoning mobile phone exports, foster domestic manufacturing, and streamline the business environment, according to industry executives and market analysts.  

Pankaj Mohindroo, Chairman of the India Cellular and Electronics Association (ICEA), emphasized the importance of building scale through low input tariffs to position India as a global hub for electronics manufacturing and exports. The industry association had previously submitted a report underscoring the necessity of tariff rationalization to compete with global counterparts like China and Vietnam.

Sunil Vachani, Chairman of Dixon Technologies, a mobile manufacturer for brands such as Motorola, Samsung, and Xiaomi, praised the government's decision, stating that the reduction in duties will enhance India's global competitiveness. He emphasized that while duties are eventually refunded, high duties could adversely affect exports, with only direct exporters benefiting from refunds.

Market tracker IDC noted that while some key components aren't covered under the new notification, resulting in limited impact on end prices, the move is in line with India's efforts to scale up electronics manufacturing and reduce dependency on China.

The decision is anticipated to address interpretation issues by government field formations in calculating duties on input parts, providing relief to the industry and making mobile phone manufacturing more competitive. While IDC suggested a modest impact on consumer pricing, Counterpoint Research believed the reduction could lead to a 3-5% drop in prices for entry-level smartphones. The government's intention with this move is seen as a strategic effort to stimulate demand in the smartphone industry, particularly in the entry and budget segments, which have experienced sluggish demand over the past two years. This reduction in costs for manufacturers is expected to benefit consumers in the near term.

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