IT ministry fears losing out to China, Vietnam in smartphone exports race: Source

Smartphone push: In a bid to establish itself as a major player in the global smartphone export market, India faces a looming threat from competitors such as China and Vietnam. A confidential document obtained by Reuters reveals that MoS Information Technology, Rajeev Chandrasekhar, is urging swift action to make the country more attractive to global companies by reducing tariffs.

Smartphone manufacturing is a cornerstone of Prime Minister Narendra Modi's economic agenda, to lure tech giants like Apple, Foxconn, and Samsung to India. While the government attributes last year's 16 per cent growth in production to financial incentives, critics argue that high tariffs are deterring companies from diversifying their supply chains beyond China.

Chandrasekhar's January 3 letter and presentation to the Finance Minister highlight the pressing concern over India's competitiveness. He points out that India's high production costs are mainly due to imposing the highest tariffs among key manufacturing destinations. With global supply chains shifting away from China due to geopolitical reasons, India risks losing out to countries like Vietnam, Mexico, and Thailand if immediate measures are not taken.

Comparisons with China and Vietnam reveal that these nations benefit from lower tariffs on components, driving their success in smartphone exports. India's smartphone exports accounted for only 25 per cent of production last year, while China and Vietnam boasted significantly higher figures at 63% and 95%, respectively.

Chandrasekhar advocates for a swift tariff reduction strategy, urging the Finance Minister to align policies with India's ambitions of becoming a global electronics manufacturing hub. Despite recent tax reductions on certain components, including battery covers, other key tariff cut requests were not accommodated in the latest budget.

With India seeking to capture 25 per cent of the global electronics manufacturing market by 2029, the documents reveal that the current stake stands at a mere 4%. Chandrasekhar emphasizes the need to shift focus from the saturated domestic market to an export-oriented strategy, urging a tariff policy overhaul to attract global supply chains.

As India grapples with the imperative to maintain its economic momentum and allure global manufacturers, the spotlight is on the Finance Ministry to reconsider tariff structures and ensure the country remains competitive on the global stage.

With Reuter's Input