India Likely To Be Far Behind China Vietnam In Smartphone Production Due To High Tariff On Components

Smartphone Production Hub: Modi government is aiming to make India the largest mobile phone export hub. For this, the government is also giving financial incentives to companies manufacturing mobile phones in India under the PLI scheme. Despite this, India is lagging behind China and Vietnam in terms of exports. The reason for this is the high tariff charged on mobile phone components due to which big companies are shying away from coming to India for mobile manufacturing.

According to a report by Reuters, Minister of State for Information Technology Rajiv Chandrashekhar has written a letter to the Finance Minister informing him about the concerns of the IT Ministry. He wrote in a letter to the Finance Minister that due to high tariff on mobile components, India is lagging behind in competition compared to China and Vietnam. India has the highest tariff among the major mobile manufacturing countries in the world. He wrote that in view of geopolitical developments, a large number of supply chains are shifting out of China but India is lagging behind in taking advantage of it. In such a situation, if India does not take a concrete decision now to attract them, then all of them will shift to Vietnam, Mexico and Thailand. He wrote that India can become the hub of smartphone manufacturing only due to low tariff on mobile phone components.

The components of smartphones manufactured in India are imported from China and other countries. To promote local manufacturing, the government has imposed high tariffs on imported components, which increases the prices of smartphones after they are made in the country.

In the document sent to the Finance Minister, Rajiv Chandrashekhar cited low taxes in China and Vietnam and wrote how it has helped in increasing exports in those countries. Only 25 percent of India's total smartphone production was exported, while 63 percent of China's $270 billion production was exported, while 95 percent of Vietnam's $40 billion smartphone production was exported. India has set a target of smartphone production of 100 billion dollars, of which the target is to export 50 percent. But high tariff is the biggest obstacle in this path.

India has set a target of 25 percent share in global electronics manufacturing by 2029. Despite Apple, Foxconn and Xiaomi increasing production in India in recent times, India's share at present is only 4 percent. India is charging up to 20 percent tax on many components. The Information Technology Minister is in favor of reducing it to 15 percent. He said that Vietnam and China do not charge more than 10 percent tax. He said that to attract global supply chain, India will have to impose tariffs similar to China and Vietnam. Last month, Xiaomi also asked the government to reduce the import duty on cameras and USB cables installed in smartphones.

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