India risks WTO wrath with higher duties on mobile phones as it seeks to boost domestic manufacturing

• India has hiked import duty on key mobile phone components like PCBA and display panels, which could make smartphones more expensive.
• Earlier, the EU, Japan and Taiwan claimed that the import duties on mobile phones exceed the limit agreed to by India.
• On the other end of the spectrum, Indian mobile phone makers are fearing for their jobs after a reduction in incentives and growing global competition.
• FM Sitharaman had announced that the government would soon announce a new policy to incentivize domestic manufacturing of mobile phones.

The Indian government announced import duty hikes on several key components of mobile phones, a move that could likely attract WTO’s ire. Key WTO members like the EU, Japan and Taiwan could once again challenge India for violating the IT Agreement which came into force in 1997 and was further enhanced in 2015.

“India’s import duties on mobile phones and some communication equipment have already been challenged at the WTO by members such as the EU, Japan and Taiwan. The additional import duties on mobile phone parts can be challenged by the same members,” said an official to Business Line.

Budget 2020 doubles customs duties on key mobile phone components

In the Union Budget 2020, Finance Minister Nirmala Sitharaman announced an increase in duties on key mobile phone components.

Duty on printed circuit board assemblies (PCBA), which is an integral part of mobile phones and other electronic equipment, was increased from 10% to 20%. Duty on display panels has been increased from nil to 10%.

Given that the cost of displays form a major part of the overall cost of making mobile phones, it is very likely that this could result in a substantial increase in prices of phones.

Will India back down or take on EU, Japan and Taiwan for the second time?

The complaints of the EU, Japan and Taiwan revolve around the argument that the import duties levied on mobile phones and parts, and other electronic equipment exceed the limits agreed to at WTO by India.

However, the Indian side’s argument was that these items were not covered in the agreement. It remains to be seen if the government issues an official clarification on these increased duties this time around.

Although the Indian government has announced its intent to give a boost to domestic manufacturing of mobile phones with a new policy, hiking important duties on key mobile phone parts could seem counterproductive at least in the short run.

On the other hand, Indian mobile phone makers fearing for their jobs in the eye of falling incentives and increasing global competition. It would be wise on the government’s part to announce its much-promised new policy, soon.

See also:

Government to announce new policy to encourage domestic manufacturing of mobile phones and electronic equipment

Budget 2020: India’s mobile phones makers fear for jobs in the face of fewer incentives and global competition

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