India must act fast to lure global smartphone manufacturers or risk losing out to China, Vietnam

In a bid to establish itself as a major player in smartphone exports, India faces the risk of losing ground to competitors like China and Vietnam. Government documents obtained by Reuters reveal that India’s Minister of State at the Ministry of Electronics and Information Technology, Rajeev Chandrasekhar, emphasised the need for swift action to entice global companies with reduced tariffs.

Prime Minister Narendra Modi’s economic agenda prioritises smartphone manufacturing as a cornerstone for growth and job creation in the country. Despite India’s status as the world’s second-largest mobile market, with production reaching $44 billion last year, concerns loom over the country’s competitiveness in attracting tech giants like Apple, Foxconn, and Samsung.

While financial incentives have driven production growth, high tariffs pose a significant challenge. Critics argue that these tariffs deter companies from diversifying their supply chains beyond China, prompting them to favour countries like Vietnam, Thailand, and Mexico, which offer more favourable tariff conditions.

Documents dated January 3rd, from Minister Rajeev Chandrasekhar addressing the Finance Ministry, highlights India’s vulnerability to losing out on opportunities due to its tariff regime. Minister Chandrasekhar stressed the urgency of aligning tariffs with global standards, particularly citing the advantages enjoyed by China and Vietnam, as per the Reuters report

Lower tariffs on components is the key to India’s ambition to attract smartphone manufacturers. While domestic production is substantial, manufacturers in India still rely on imported high-end parts from China, which raises costs due to tariff impositions.

Recent remarks by US Ambassador Eric Garcetti also highlighted concerns about India’s tariff policies, suggesting that such barriers hinder foreign investments. He emphasized the importance of creating an open market environment to foster growth.

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The document in question also highlights the disparity between India’s export performance and that of China and Vietnam.

Despite recent adjustments in tariffs on certain components, the IT Ministry’s lobbying efforts for broader tariff cuts in the annual budget were not fully realized. Tariffs on key components such as chargers and circuit boards remain high.

(With inputs from agencies)