Advocating for reduction in import duty for the electronics sector ahead of the Union Budget, India Cellular and Electronics Association (ICEA) and IKDHVAJ Advisors LLP in a report on Thursday said that higher import duties are making India less competitive even in global markets. Huh. In the form of negating the effect of supporting policies such as performance-linked incentives (PLIs).
According to the report, India’s tariffs were to be compared with those of competing countries such as China, Mexico, Thailand and Vietnam, including a detailed study of 120 tariff lines of electronics priority products in India and these four major competitive investment destinations. These imports account for 80% of the cost of mobile phones – India’s largest product in the $75 billion electronics sector.
The report said that similar to India, its competitive economies have also relied on a combination of trade and investment policies for their economic growth, improving domestic capabilities to participate in global value chains, and investing through subsidies. The emphasis is on attracting and providing convenience. Improved business and operating conditions for investors and domestic producers.
“However, there is a huge difference in the policies adopted by India and its competing economies. India has high tariffs and relies heavily on raising tariffs compared to its competing economies. Thus India’s policies are driven by domestic market rather than opportunities in global markets,” it said.
It said that an important implicit reason for India raising tariffs is that India’s large market size with tariff hikes will attract FDI. “This estimate may not be true for the electronics sector as a whole… India’s domestic market is not very large as compared to the global market. Furthermore, a comparison with competing economies shows that the size of the domestic market is The result does not correlate with higher exports or GVCs. This implies the need for careful consideration of the potential adverse impact of raising duties on exports and even investments.
Further it has been said that while India’s large electronics markets may seem attractive, they are very small in a global context, and India does not produce nearly 50% of the components on which tariffs have been raised. “Therefore, the impact of tariffs is likely to be adverse on India’s competitiveness. India’s tariffs should be compared with those of competing countries. Tariff hikes have adverse effects on costs, prices, production, exports and imports. This is due to ancillary policies.” also negates the effect,” he said.
The comparative study highlights that 32 of the 120 tariff lines in India have zero tariffs, while others have zero tariffs, ranging from 53 (China) to 74 lines (Mexico). For non-zero tariffs, India’s tariffs range from 85% (Thailand, Vietnam) to 95% (China) of these tariff lines. Vietnam’s effective tariffs are also low due to FTAs with major suppliers of inputs. “India has the largest tariff lines for selected products, with tariffs in 2020 being higher than in 2014,” it said.
“The $300 billion manufacturing target by 2026 requires consistency and prior consultation before tariffs are finalized. Tariffs go to the core of competition and scale. For the Union Budget 2022-23, we request the government to review all tariffs on inputs for PLI schemes and reduce tariffs in areas where there is no local capacity”, said Pankaj Mohindroo, President, ICEA.
The study said that for India to integrate into global supply chains, its tariffs on inputs should at least match or be below those of its competitors. Consideration of a tariff increase should only occur in cases with a clear roadmap with large domestic capacity or specific, well-identified vendors who can produce components for manufacturers at a globally competitive cost, quality and scale. not otherwise.
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