India has proposed to the US that it could consider lowering import duties on high-end mobile phones as part of the trade deal being worked out by the two governments. However, it can’t bring down import levies on cheap phones as it could hurt domestic manufacturers, a government official has said.

“One of the big demands made by the US is that India should revoke the 20 per cent import duties on mobile phones that it imposed over the last couple of years. In response, Indian officials said that duty cuts or elimination on high-end phones, say over ₹50,000, could be considered,” an official told BusinessLine.

US unhappy

The US, however, is not ready to agree to the suggestion and is insisting on removal of import duties from all categories of mobile phones, the official added.

Washington, which had sought a number of concessions from India including market access for dairy, medical equipment, and mobile phones, decided to announce the withdrawal of GSP (Generalised System of Preferences) possibly because it was unhappy with India’s offers and wanted to put pressure on the country to improve it.

Budget phone-makers may suffer

The Commerce & Industry Minister Suresh Prabhu recently said that India had made an offer to the US on the demands made by it after consulting several departments including IT and agriculture.

“Indian officials have tried explaining to the US that budget phones are mostly exported by China and lowering or removing import duties for that segment is only going to help Chinese manufacturers. The US, however, sells only high-end iphones to India. So lowering duties on high-end phone would directly benefit its manufacturers,” the official said.

Moreover, since bulk of the domestic phone manufacturers in India make budget phones, maintaining high tariffs on their imports would continue shielding them.

“We hope that bilateral talks on the trade package will re-start soon and the US will understand our logic. Lowering duties on high-end phones is something that India can deliver without hurting its own interests,” the official said.

Interestingly, the EU has recently complained to the WTO about India’s import duties on mobile phones and some other IT products and has argued that the duties go against the IT Agreement of the WTO, of which India is a signatory.

The on-going trade talks between India and the US got stalled last month when Washington announced that it would withdraw the Generalised System of Preferences from May 2019, under which about 3,500 items from India were allowed duty-free entry into the US.

As part of the deal, New Delhi had asked for more market access for its fruits and agri-produce and removal of the penal duties imposed on India’s steel and aluminium by the US.

“Things are not yet clear when the talks would restart. If things don’t move now because of the Indian elections, the US should postpone the withdrawal date for GSP so that the matter can be sorted out after the elections,” the official said.