Reduction in import duty for phone parts will not help smartphone exports: Report

The New Delhi-based think tank Global Trade Research Initiative (GTRI) has cautioned against reducing the import tariff on smartphone components in the forthcoming Union Budget 2025-26.

In response to recent lobbying by some industry groups for reduced tariffs for mobile phone components, GTRI said that its analysis showed that tariff cuts on smartphone parts would hurt India’s electronics ecosystem without helping exports. The organisation said tariff cuts could harm India's developing component ecosystem, discourage investment, and hurt the goal of self-reliance. It also said that current export schemes already allow duty-free imports for manufacturing exports, benefiting firms like Apple and Samsung and further cuts won't increase exports.

“India's success in smartphone manufacturing stems from policies promoting local production through tariffs, incentives, and phased programs. Cutting tariffs could weaken this framework. Lower tariffs could encourage unsustainable assembly-based operations, as seen in past policy failures. Duty cuts would make local firms uncompetitive, resulting in job losses”, Ajay Srivastava, co-founder, GTRI said.

The GTRI analysis also revealed that electronics imports have risen significantly, and further tariff cuts would worsen this trend, increasing India's reliance on foreign suppliers.

In FY2024, India produced smartphones worth $ 49.2 billion, with Xiaomi leading in production volume, followed by Vivo and Samsung. The estimated share of firms in India’s smartphone production during this period was 20.7% for Xiaomi, 18.23% for Vivo, 13.69% for Samsung, 13.45% for Realme, 11.71% for OPPO, 4.82% for OnePlus, 4.1% for Apple, and 13.3% for other brands.

Smartphone exports have also seen a significant rise, increasing from $4.8 billion in FY2022 to $11 billion in FY2023, and further reaching $15.6 billion in FY2024. Exports are expected to touch $18.3 billion in FY2025. Around 90% of India's smartphone exports in FY2024 were to the EU, USA, and UAE, with the USA accounting for 35.8%, the EU for 37.5%, and the UAE for 16.5%. Apple and Samsung dominated India's smartphone exports, contributing 88% of the total. Apple’s iPhone exports were valued at $10.2 billion, accounting for 65% of the country’s total smartphone exports, while Samsung exported smartphones worth $3.5 billion, making up 22.5%.

In terms of value, smartphones became India’s fourth-largest export item in FY2024, following diesel, aviation fuel (ATF), and cut and polished diamonds.