India has set a target to account for 25 percent of global electronics manufacturing by 2029, but the latest data shows that the country currently holds just 4 percent. This highlights the need for India to take action in order to attract global companies and prevent losing ground to competitors such as China and Vietnam.
Recognizing the importance of smartphone manufacturing in Prime Minister Narendra Modi’s plan to stimulate the economy and create job opportunities, the Indian government has offered financial incentives to companies like Apple, Foxconn, and Samsung to invest in the country. However, there are concerns that high tariffs in India discourage companies from diversifying their supply chains beyond China. Other countries, such as Vietnam, Thailand, and Mexico, have surpassed India in phone exports by offering lower tariffs on components.
Indian Deputy IT Minister Rajeev Chandrasekhar has raised concerns about these uncompetitive tariffs in a letter and confidential presentation to the finance minister. Chandrasekhar emphasizes the need for immediate action to prevent the shift of supply chains to countries like Vietnam, Mexico, and Thailand. He also highlights how lower taxes in China and Vietnam have contributed to their export success.
The goal for India is to secure a 25 percent share of global electronics manufacturing in the next decade. However, the current data shows that India’s stake is only 4 percent, despite recent increases in production from companies like Apple, Foxconn, and Xiaomi.
Chandrasekhar’s documents, presented to Finance Minister Nirmala Sitharaman, aim to influence the annual budget by advocating for lower tariffs. Although some taxes on components have been reduced by the finance ministry, many requests for tariff cuts have been denied.
India currently imposes a 20 percent tax on various parts, including chargers, circuit boards, and fully assembled phones. Chandrasekhar proposes reducing these taxes to 15 percent this year. He also highlights the disparity between India and its competitors, as Vietnam and China impose tariffs below 10 percent on components from their “most-favored nation” trading partners.
To establish itself as a global electronics manufacturing powerhouse, India must prioritize attracting global supply chains by aligning its tariff policies with those of its competitors. With a growing domestic demand driving industry profitability, India now needs to focus on increasing exports rather than solely relying on the domestic market. By implementing a new strategy and reducing tariffs, India can achieve its goal of producing over $100 billion worth of mobile phones annually, with 50 percent of that being exported.
FAQ:
Q: What is India’s goal in electronics manufacturing?
A: India aims to account for 25 percent of global production by 2029.
Q: What is India’s current stake in global electronics manufacturing?
A: India’s current stake stands at just 4 percent.
Q: Why is it important for India to attract global companies?
A: India needs to attract global companies to avoid losing ground to competitors like China and Vietnam.
Q: What is the significance of smartphone manufacturing in India?
A: Smartphone manufacturing is seen as a crucial element in Prime Minister Narendra Modi’s plan to boost the economy and generate employment opportunities.
Q: What was the total production of mobile phones in India last year?
A: India saw a 16 percent year-on-year growth in production, totaling $44 billion last year.
Q: What financial incentives have been provided to attract companies to invest in India?
A: Financial incentives have been provided to companies like Apple, Foxconn, and Samsung.
Q: Why do lawmakers and lobby groups argue against India’s high tariffs?
A: High tariffs deter companies from diversifying their supply chains beyond China.
Q: Which countries have surpassed India in phone exports due to lower tariffs?
A: Vietnam, Thailand, and Mexico have surpassed India in phone exports due to lower tariffs on components.
Q: What are the concerns expressed by Indian Deputy IT Minister Rajeev Chandrasekhar?
A: Chandrasekhar expressed concerns about uncompetitive tariffs and the shifting of supply chains to countries like Vietnam, Mexico, and Thailand.
Q: What is India’s current stake in global electronics manufacturing?
A: India’s current stake stands at just 4 percent.
Q: What action did Chandrasekhar propose to prevent the shifting of supply chains?
A: Chandrasekhar proposed a reduction of tariffs to prevent the shifting of supply chains to countries like Vietnam, Mexico, and Thailand.
Q: What taxes does India impose on various parts of electronics?
A: India imposes a 20 percent tax on various parts, including chargers, circuit boards, and fully assembled phones.
Q: What reduction in taxes did Chandrasekhar call for this year?
A: Chandrasekhar called for a reduction of taxes from 20 percent to 15 percent this year.
Q: What is the disparity between India and its competitors in terms of tariffs?
A: Vietnam and China do not impose tariffs above 10 percent on components from their “most-favored nation” trading partners, unlike India.
Q: How can India secure its position as a global electronics manufacturing powerhouse?
A: India can prioritize attracting global supply chains by aligning its tariff policies with those of its competitors.
Q: What should be India’s focus in order to increase industry profitability?
A: India should shift its focus towards increasing exports rather than relying solely on the domestic market.
Definitions:
– Stake: The share or proportion of something that someone has or claims to have.
– Tariffs: Taxes or duties imposed on imported or exported goods.
– Lobby groups: Organizations that seek to influence legislation or government policies on behalf of a particular interest or group.
– Supply chains: The sequence of processes involved in the production and distribution of a commodity, from the supplier to the consumer.
– Components: Individual parts or elements that make up a whole.
– Surging: Increasing rapidly or suddenly.
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