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India has the highest tariffs on inputs in the electronics segment among competing economies, according to a study by the industry body, India Cellular and Electronics Association (ICEA). The study analysed input tariffs in the electronics sector across five nations.
Given that high tariffs impact competitiveness, the industry is seeking a reduction in tariffs, and a glide path to match Vietnam and other competing nations.
The study shows that high tariff-induced costs accentuate India’s cost disability vis-à-vis the four competing economies (China, Mexico, Thailand and Vietnam). The study is critical for evaluating India’s competitiveness to achieve the $300-billion electronics production goal by 2025-26 – including $120 billion of exports, it said.
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The study titled ‘A comparative study of import tariffs in electronics 2023’ also noted that instead of building a domestic ecosystem, high import duties perpetuate imports as it results in the uncompetitiveness of the domestic ecosystem.
“Tariffs act in the reverse direction to their intended purpose by adversely impacting costs, growing domestic production and exports. High tariffs only work in an import substitution phase, not when a sector like electronics has entered the phase of export-led growth. India’s mobile phone exports increased nearly 100 per cent to $11.1 billion, and electronics exports by around 56 per cent to $23.6 billion by March 2023,” it said.
In case of an interpretation dispute, ICEA recommended that Customs and the Ministry of Electronics and IT (MeitY, nodal Ministry for electronics) could jointly ensure proper technical classification under the respective codes, based on established principles.
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The study highlights that in order to sustain India’s production and exports target for 2025-26, export growth has to be even higher (64.5 per cent to 76.6 per cent) than the highest annual growth rate (55.5 per cent) achieved during 2015 to 2022-23.
Focused attention and policy support is, therefore, required to ensure the targeted growth of the electronics sector is achieved, ICEA, added.
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