India's Smartphone Export Aspirations Face Hurdles Amid Tariff Concerns

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ndia’s ambitious plans to position itself as a major smartphone export hub are under threat, with Deputy IT Minister Rajeev Chandrasekhar sounding the alarm on the urgency to lower tariffs. Government documents reveal growing fears that India may lose ground to competitors such as China and Vietnam in the fiercely contested smartphone export race.

India’s smartphone manufacturing, a key element of Prime Minister Narendra Modi’s economic agenda, has seen impressive growth, attracting global giants like Apple, Foxconn, and Samsung. However, concerns are now being raised about the impact of high tariffs, which some argue act as a deterrent for companies seeking to diversify their supply chains beyond China.

Deputy IT Minister Chandrasekhar, in documents addressed to Finance Minister Nirmala Sitharaman, expressed deep concerns about India’s competitiveness due to uncompetitive tariffs. He stressed the need for immediate action to prevent a potential shift of supply chains to countries like Vietnam, Mexico, and Thailand.

Geopolitical realignment and urgency:

Highlighting the ongoing geopolitical realignment and the resultant relocation of supply chains from China, Chandrasekhar emphasized the need for swift action. He warned that delays in addressing tariff concerns could lead to India losing out to more competitive destinations.

While financial incentives have fueled the growth of smartphone production in India, the Deputy IT Minister acknowledged that high tariffs pose a challenge. The country’s success, he noted, is due in large part to these incentives, but he urged a shift in tariff policies to align with the nation’s export ambitions.

India’s export rates for smartphones stood at 25% in 2023, a fraction of China’s 63% and Vietnam’s staggering 95%. The Deputy IT Minister’s documents underscored the need for India to match China and surpass Vietnam in terms of competitive tariffs to secure global supply chains.

Budgetary implications

Chandrasekhar’s documents were submitted as part of a lobbying effort for lower tariffs in the annual budget. While some component taxes saw reductions, other requested tariff cuts were not implemented. The minister called for a shift in tariff policy to accommodate India’s evolving export ambitions.

With India’s domestic smartphone market nearing saturation, the focus is shifting towards exports. The government aims to account for 25% of global electronics manufacturing by 2029, but the official documents revealed that India’s current stake is just 4%. The urgency to revise tariff policies is seen as critical to attracting foreign investments and ensuring competitiveness in the global smartphone manufacturing landscape.

As India stands at a crossroads in its pursuit of becoming a smartphone export powerhouse, the government faces the challenge of balancing financial incentives with competitive tariffs to secure its position on the global stage. The decisions made in the upcoming budget could shape India’s role in the highly competitive smartphone manufacturing sector.

Source: Reuters