High input tariffs reducing competitiveness in electronics manufacturing Industry: ICEA

New Delhi, July 7 (KNN) India’s booming electronics manufacturing industry is being tarnished by high input tariffs, resulting in cost disabilities and increasing cost of production, according to a report by India Cellular and Electronics Association(ICEA).

In a comparative study of input tariffs across India, China, Vietnam, Thailand, and Mexico covering 120 key components, ICEA found that increasing tariffs on inputs increases the cost of production, thereby reducing the competitiveness of India in electronics manufacturing, for both finished products and inputs in global value chains.

Compared to the competing economies, India’s tariffs increased more than others since 2014 while the increase in its exports was lower than them, while despite lower tariffs, the competing economies performed better in terms of exports and trade deficit for electronics, it said.

Drawing a line-by-line comparison of India’s non-zero tariffs across 120 components shows that they are higher for up to 98 per cent lines compared to Vietnam and 90 per cent of the lines compared to Thailand.

The study also found out that increasing tariffs on inputs also negates the support provided under the production-linked incentive scheme for large electronics, under which India’s mobile phone exports surged nearly 100 per cent to USD 1.1 billion and electronics exports by around 56 per cent to USD 23.6 billion by March 2023.

“Tariffs act in the reverse direction to their intended purpose by adversely impacting costs, growing domestic production and exports,” ICEA said, adding that high tariffs work only during the import substitution phase, and not when the sector has entered a phase of export-led growth.

The report found out that the higher tariffs, combined with an increase in GST rates from 12 per cent to 18 per cent, has resulted in mobile phones being more expensive to produce and sell in India versus other competing manufacturing nations.

It estimates that the cost of production of mobiles would increase by about 4 per cent for total production, offsetting the incentive provided under the PLI scheme.

The industry association, which represents mobile makers like Apple, Xiaomi, Lava and others has recommended the government to review all duties imposed in the past five years to evaluate their current relevance.

KNN Bureau