As the Union Budget approaches, the India Cellular & Electronics Association (ICEA) has recommended lowering input tariffs to build a robust components ecosystem in the country. The recommendations are based on a "tariff study" conducted by ICEA, comparing seven competing economies, including India.
The ICEA report emphasized that high tariffs on inputs hinder growth and competitiveness, reducing exports and limiting production of final products such as mobile phones. The report suggests that reducing tariffs on inputs is essential to address these issues.
"We acknowledge the importance of developing the domestic supply chain," the report stated. "However, the approach should not be through high tariffs but by reducing disabilities, enhancing competitiveness, and implementing incentive schemes to fill existing gaps."
To attract global value chains (GVCs) and scale up production, ICEA proposed reducing tariffs on all cost-increasing components, including parts of complex subassemblies, to zero. Additionally, the association recommended removing the 2.5% tariff on sub-assembly parts and inputs.
"These tariffs are counterproductive. They do not foster a domestic industry but instead increase costs, complexity, and compliance burdens for legitimate manufacturers," the report noted.
The ICEA also called for appropriate policy and financial support from the government to develop a large-scale components and sub-assembly ecosystem. They suggested that this support should include a longer gestation period and extended incentive schemes.
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