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India has the highest tariffs on inputs in electronic segment among competing economies such as Vietnam and Thailand, ICEA said on July 6 citing its latest study as the industry body made a strong pitch for reduction in tariffs.
The high tariffs impact competitiveness, ICEA said, adding that the industry is seeking reduction of tariffs, and glide path to match Vietnam and other competing nations.
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The study revealed that high tariff-induced costs accentuates India’s cost disability vis-à-vis the four competing economies.
India Cellular and Electronics Association (ICEA) said the study is critical to evaluate India’s competitiveness to reach the $300-billion electronics production goal by 2025-26, including $120 billion of exports.
A line-by-line comparison of India’s non-zero tariffs shows that India’s tariffs are higher for up to 98% lines compared to Vietnam (for FTA tariffs) and 90% of the lines compared to Thailand.
The competing economies have nearly double or more zero-tariff lines than India, according to the study released by ICEA at a conference.
ICEA, India’s apex electronics industry association, conducted the five-nation study of input tariffs in electronics sector across India, China, Vietnam, Thailand and Mexico, covering 120 key components.
“…our recommendation is that we should begin decompression exercise starting 2023. Relevant FTAs will take time, targeted tariff reduction is the immediate solution,” Pankaj Mohindroo, Chairman at ICEA, said during a briefing.
ICEA study mentioned that over 80% of Vietnam’s imports for 120 tariff lines are under free trade agreements (FTAs). The average tariff in Vietnam (considering their FTA imports) is much lower — close to 1%.
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The study also claimed that instead of building a domestic ecosystem, high import duties perpetuate imports as it results in 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,” ICEA release said.
India’s mobile phone exports increased nearly 100% to $11.1 billion, and electronics exports by about 56% to $23.6 billion by March 2023.
The study shows that between 2015 and 2021, while India’s electronics tariffs rose, those of the competing economies decreased.
India and Mexico have trade deficits, while China, Thailand and Vietnam have moved to an overall trade surplus.
Despite lower tariffs in 2022 and while tariffs continually decreased during 2015 to 2021, each of the four competing economies performed better than India in exports, trade deficit and surplus for electronics.