Highlights

• Basic customs duty on mobile phones and PCBs reduced from 20% to 15%
• Move aimed at making smartphones and accessories more affordable
• Expected to enhance India’s mobile manufacturing and export capabilities
• Industry leaders praise the decision for boosting competitiveness

In a move that has sent ripples through India’s tech industry, the Union Budget 2024 has proposed a significant reduction in the basic customs duty (BCD) on imported mobile phones, printed circuit board assemblies (PCBAs), and mobile chargers.

This decision, announced by Finance Minister Nirmala Sitharaman, marks a pivotal shift in the government’s approach to the mobile technology sector.

The reduction of BCD from 20% to 15% is being hailed as a consumer-friendly measure, potentially making smartphones and accessories more affordable.

However, the implications of this decision extend far beyond just price tags.

“With a three-fold increase in domestic production and almost a 100-fold jump in exports of mobile phones in the last six years, the Indian mobile industry has matured. In the interest of consumers, I now propose to reduce the basic customs duty (BCD) on mobile phone, mobile PCBA, and mobile chargers to 15%,” Sitharaman said while presenting the Union Budget 2024-25 in Parliament.

A Maturing Mobile Ecosystem

This policy shift reflects the government’s recognition of India’s rapidly maturing mobile phone industry.

Over the past six years, we’ve witnessed a remarkable transformation – domestic production has tripled, and mobile phone exports have skyrocketed by an astounding 100-fold.

“To increase value addition in the domestic electronics industry, I propose to remove the BCD, subject to conditions, on oxygen-free copper for manufacture of resistors. I also propose to exempt certain parts for the manufacture of connectors,” Sitharaman said.

“I propose to undertake a comprehensive review of the rate structure over the next six months to rationalise and simplify it for ease of trade, removal of duty inversion and reduction of disputes,” added the finance minister.

This growth story is a testament to the success of initiatives like ‘Make in India’ and the Production Linked Incentive (PLI) scheme.

Arijeet Talapatra, CEO, Transsion India said, ”Transsion India welcomes the Ministry of Finance’s decision to reduce the basic customs duty from 20% to 15% on mobile phones, mobile PCBA, and chargers. This policy change will significantly benefit both manufacturers and consumers, fostering a more competitive smartphone market and strengthen our position in the global market. This move will undoubtedly bolster the industry’s growth making smartphones more affordable and we remain committed to the ‘Make-in-India’ initiative to bring the best-in-class smartphones to the ever-evolving Indian market.”

 The customs duty reduction is a strategic move that acknowledges this progress while also aiming to further boost the sector. It’s a delicate balancing act – supporting domestic manufacturing while also ensuring that Indian consumers have access to the latest global technologies at competitive prices.”

Pankaj Mohindroo, Chairman, ICEA  said “We would like to congratulate the government for this landmark budget. We are impressed with its intent and direction focusing on enhancing manufacturing and export competitiveness. Hon’ble Finance Minister has also acknowledged the tremendous growth of mobile phone manufacturing and exports. 

We had recommended to reduce BCD on mobile phones, its PCBA and Charger/Adapter 15%, which has been accepted. The mobile and electronics industry is elated with the announcements and will go a long way to enhance manufacturing, exports and our competitiveness. Our proposal for tariff slab rationalisation, as has also been acknowledged and Hon’ble FM has announced that it will be taken up in the next six month, will further embolden the industry and its competitiveness.”

Industry Reactions and Expectations

The response from industry leaders has been overwhelmingly positive.

Executives from major tech companies see this as an opportunity to enhance India’s position in global value chains and attract more large-scale manufacturing operations.

“We welcome the Budget 2024 announcement to reduce BCD on mobile phones, PCBA and chargers, while simultaneously extending exemptions on inputs/raw materials for smartphone manufacturing, capital goods, and inputs for capital goods in the electronics industry.

At Xiaomi India, we have been manufacturing nearly 100% of our smartphones locally with a strong emphasis on sourcing components like PCBA, charging cables, camera modules, and mechanics, among others. Today’s announcement will help further strengthen the domestic electronics manufacturing ecosystem.

The proposal for a comprehensive review of the tariff rate structure is another positive step that will further strengthen the industry.

We appreciate the government’s emphasis on increasing women’s participation in the workforce and the employment-linked incentives for first-time employees. With these progressive steps, we anticipate a surge in consumer spending, including increased demand for smartphones.” said, Mr. Muralikrishnan B, President at Xiaomi India.

Mr. Amit Khatri, Co-Founder, Noise  chimed in as well. “The Union Budget 2024 presented by Finance Minister Nirmala Sitharaman is a visionary step towards inclusive growth, with a strong emphasis on manufacturing, upskilling, and women empowerment. Youth and participation of women in the workforce hold the key to India’s success. 

To this end, the focus on extensive training and skill development initiatives demonstrates a clear commitment to boosting employability and productivity. By linking job creation in manufacturing to first-time workers and offering EPFO incentives, the government is paving the way for a robust manufacturing ecosystem, creating 4 crore jobs over the next five years.

It is certainly a commendable initiative to boost local manufacturing. Additionally, offering internship opportunities in the top 500 companies to 1 crore youth is a strategic move that will equip our young population with the skills and experience necessary to thrive in a competitive global economy. 

The establishment of e-commerce export hubs in a PPP model is another significant step taken by the government and will significantly empower MSMEs and traditional artisans to compete internationally. It will open opportunities for Indian players to boost their reach globally while enhancing the ease of doing business and accessing new markets. India has long been an attractive consumer market for international brands, supported by our collaborative and business-friendly policies that enable seamless operations. The export hubs are an efficient step in unlocking similar avenues for homegrown companies, allowing a global stage for their innovation and entrepreneurial mindset, and strengthening India’s position in manufacturing.

Lastly, I feel the abolition of the angel tax will undoubtedly boost funding in the startup ecosystem, fueling innovation and growth. This move, along with incentives for job creation in the manufacturing sector and support for MSMEs, will not only stimulate valuable employment opportunities for millions of young people but also ensure economic resilience, laying a strong foundation for a powerful growth trajectory for India. Driven by the vision of Viksit Bharat, we look forward to actively participating in the nation’s journey towards global prominence and innovation leadership,” he said.

This move will not only benefit manufacturers but also lead to a more competitive smartphone market, potentially driving innovation and improving quality.

Moreover, there’s anticipation that this policy change could catalyze growth in smartphone adoption, particularly in the mid-range and budget segments.

The potential for more affordable 5G devices could accelerate the transition from feature phones to smartphones, a crucial step in India’s digital transformation journey.

Bipin Gupta, Product Manager, EZVIZ also commented on the same claiming, “The 2024 Union Budget brings hopeful developments for the smart home security sector. As a global leader in smart home solutions at EZVIZ, we are encouraged by the government’s focus on enhancing infrastructure and consumer spending.

The increase in the standard deduction to Rs 75,000 and the revised tax slabs—where individuals earning up to Rs 3 lakh will pay no tax, and those earning between Rs 3 lakh to Rs 7 lakh will benefit from a 5% tax rate—are likely to increase disposable income. This, in turn, could drive greater adoption of smart home technologies as consumers will have more flexibility to invest in such solutions.

The allocation of Rs 50,000 crore towards infrastructure development will also improve urban and residential environments, creating new opportunities for integrating advanced security systems in both new and existing properties. We at EZVIZ look forward to leveraging these positive changes to continue offering cutting-edge products that enhance safety and convenience for families worldwide.”

Challenges and Considerations

“The government’s decision to reduce the Basic Customs Duty on mobile phones, PCBs, and chargers to 15% marks a pivotal moment for our technology sector. This strategic move recognises the significant maturation of the Indian mobile industry in recent years and is set to attract global value chains to our shores, enabling large-scale manufacturing operations,” CP Khandelwal, Joint Managing Director – HTech, said in a statement.

Navkendar Singh, Analyst with IDC said in a statement, “This can possibly rationalise the prices, especially in the mass segments like below Rs 25,000 and give growth in domestic consumption of phones. We would love to see some price reduction below the Rs 12-13k segment to give a boost to more 5G device uptake and possibly see a 5G device below Rs 8k, which can certainly help get the market on a growth track by getting feature phone to smartphone migration at entry level” 

He added that the move could “possibly give some boost for expansion to device manufacturing in India for exports. Since it will be cheaper to import PCBA, etc, it can lead to more volumes being produced in India.”

Prabhu Ram, VP – Industry Research Group, CyberMedia Research (CMR) said, “The reduction of basic customs duty on smartphone parts to 15 per cent is a pivotal step in deepening India’s smartphone manufacturing capabilities. This move is anticipated to further bolster local assembly, attract global investments, and position India as a global smartphone manufacturing hub.”

“In the lower price segments, we may not see this as in these price segments, the margins are very low. However, this could be savings for OEMs who are importing CBU (Completely Built Units), especially Apple or new entrants who do not have manufacturing set up yet, or OEMs importing super-premium models such as foldables though in few quantities,” said Prachir Singh, Senior Analyst at Counterpoint.

While the industry’s response is enthusiastic, some questions remain.

Will the cost benefits be passed on to consumers, or will they be absorbed by manufacturers to offset other expenses?

How will this impact the domestic component manufacturing ecosystem, which has been steadily growing under the previous tariff structure?

There’s also the broader question of how this fits into India’s long-term strategy for tech self-reliance.

While lower import duties can boost consumption and potentially increase export volumes, balancing this with the need to develop a robust domestic supply chain will be crucial.

As we move forward, it will be interesting to see how this policy change shapes the mobile tech landscape in India.

Will it lead to more affordable and advanced smartphones for Indian consumers?

Could it position India as a more attractive destination for global tech giants to set up manufacturing hubs?

“On the overall electronics manufacturing, the government has focused on a very key area, which is upskilling. Announcements regarding upskilling shows the government intent to grow high-skilled labor force and will help the electronics manufacturing sector securing high-skilled local talent,” Counterpoint’s Singh said.

According to V Veerappan, Chairman, India Electronics and Semiconductor Association (IESA), the budget allocation of Rs 1 lakh crore to support commercial private-sector research will serve as a critical impetus for the sustained momentum of the electronics and semiconductors sector, as well as for R&D, innovation, and technological advancement.

One thing is clear – this move signals the government’s commitment to adapting its policies to the evolving needs of both the industry and consumers.

Mayank Arora, Director at Nangia & Co., said that the reduction in BCD exudes confidence in the domestic manufacturing capability of the Indian mobile phone manufacturing ecosystem, which has benefited through multiple fiscal interventions such as M-SIPS, SPECS and PLI Schemes. “BCD on key parts of resistors and capacitors is a positive step, and the Industry has been seeking it since the introduction of SPECS,” he added.

As India continues its journey towards becoming a global tech powerhouse, such nimble policy adjustments will be key to navigating the complex interplay of domestic growth, global competitiveness, and consumer welfare.

The true impact of this decision will unfold in the coming months and years.

For now, it represents a promising step towards a more vibrant and competitive mobile technology ecosystem in India.

Jugul Thachery, Founder & CEO, HOGR said, “The Union budget introduces promising measures for the startup ecosystem, including the removal of the angel tax, which had earlier posed challenges for emerging businesses. As an early-stage startup founder, this change can be transformative by enabling angel investments, enhancing capacities to innovate, attract talent, and scale our vision, fostering a vibrant startup ecosystem where bold ideas can flourish and contribute to the economy.

The government has taken another impactful step to strengthen data governance through the Digital India Mission, which emphasizes the collection, processing, and management of data leveraging advanced technology tools. This strategy promises to benefit many industries and open new avenues for data management. By leveraging these technologies, the food discovery segment for instance, has already witnessed significant traction, particularly in personalizing experiences using data. We are now confident that we will see greater impact in the near future.

Overall, we anticipate that these measures will create a more supportive environment for startups and contribute to a dynamic and thriving business landscape.”

FAQs

What is the new customs duty rate for mobile phones and PCBs?

The basic customs duty on mobile phones, PCB assemblies, and chargers has been reduced from 20% to 15% as per the Union Budget 2024.

How will this customs duty cut benefit consumers?

This reduction is expected to make smartphones and accessories more affordable for consumers by lowering the overall cost of imported components.

What impact will this have on India’s mobile phone industry?

The reduced customs duty is anticipated to boost domestic manufacturing, increase exports, and attract more global investments into India’s mobile phone industry.

What did industry leaders say about the customs duty reduction?

Industry leaders have welcomed the decision, stating it will enhance the competitiveness of Indian manufacturers, foster innovation, and support the ‘Make in India’ initiative.

Will this policy change affect smartphone prices in India?

While it is expected to lower costs for manufacturers, whether these savings will be passed on to consumers in the form of lower smartphone prices remains to be seen.

Also Read: Union Budget 2023: India to Set Up 100 5G Labs, Develop New Apps & Services – What Major Industry Players Have to Say

Also Read: Union Budget 2023: Mobile Manufacturing in India Crossed 31 Crore Units, What the Industry Experts Have to Say After Custom Duty Exemption on Imports Announced