Indian electronic manufacturers to get competitive edge from the hike in import duty.

The Government of India’s decision to hike duty on the import of electronic goods would boost #MakeInIndia.

The notification issued by Ministry of Finance announced the raise in custom duties on a host of electronic goods in order to give a push to Make in India initiative. As per the notification, the customs duty on products like Television sets, mobiles, microwaves, refrigerators and many others have been increased.

The customs duty on television set has been increased to 20% from 10%, while the additional duty on assembled LED panels (modules) has also been increased from nil to 7.5%. Similarly, the duty on monitors and projectors has been doubled to 20%, while for the mobile handsets the duty has been raised to 15%. The move has been cherished by electronic manufacturing and Original Equipment Manufacturers (OEMs) who Make in India. This would mean that the electronic product manufactured in India would relatively cost less than its equivalent produced abroad.

Global electronic brands, in a hope to increase revenue, were eyeing India’s booming $100 billion electronics market. The electronics market of India is one of the largest in the world and is anticipated to reach US$ 400 billion in 2022. The market is projected to grow at a compound annual growth rate (CAGR) of 24.4 per cent during 2012-2020. The hike in import duty would encourage global electronics manufacturers to set up plants in India.

#MakeInIndia, for Indians and ship it anywhere in the world – PM Modi

With local sourcing of electronic goods, India could narrow the gap between India’s export and import. As per data published by NITI Aayog, in the period of 2014-15, India imported electronic good worth $36.9 billion while its export was minimal at just $6 billion. In several countries, the contribution of the electronics industry to the GDP is significantly high. For example, the electronic industry contributes 15.5% to GDP in Taiwan, 15.1% in South Korea and 12.7% in China. But in India, this proportion is only 1.7%. As India awakes, the scenario in electronics manufacturing would see a transformational shift.

The notification of increasing import duty gives protection to the brands who manufacture here in India from low-cost OEMs products which are often dumped in price-sensitive Indian market by Chinese brands. With the commitment to Make in India, reputed International electronic brands are keen to set up large Electronic Manufacturing Clusters. iPhone maker Foxconn has agreed to set up a manufacturing plant at India’s largest electronics SEZ at JNPT Coastal Economic Zone near Mumbai.

Local sourcing and manufacturing of electronic products would usher higher profits for MSME as well large-scale manufacturers. The government also expects higher revenues from hiked import duties by the end of the year. Experts who have worked in electronics segment say that hike in import duty would lead to inflationary pricing, however Indian Manufacturers will benefit.

This protectionary measure by the government of India would strengthen Made-In-India brands. The electronics manufacturing industry has a potential to give 10 million jobs per year.

"I would like to congratulate Government on the decision to raise customs duty on some electronic items including television, mobile phone, and water heater. This move will definitely give a boost to Manufacturing in India which will in-turn push Make in India initiative by our Government. It will encourage foreign players to manufacture products in India rather than import them as the prices are expected to go up, especially for televisions. With this move, Indian manufacturers who make products with complete backward integration will benefit immensely. Manufacturers such as Videocon, one of the leading Indian manufacturer with a large workforce will get a boost as they have a very strong manufacturing base in the country. Even smaller manufacturers like Vierra will be benefitted from this step. Overall it is a great step to boost manufacturing in the country and will also lead to job generation. Make in India project by our government is a great project and to make it successful the government has started implementing the right environmental requirement.” said Mr. K.S. Raman, Former President, Consumer Electronics & Appliances Manufacturing Association (CEAMA).

The growing customer base and the increased penetration in the consumer durables segment has provided excellent scope for the growth of the Indian electronics sector. Soon, India will not just be a market for others, but it will reposition itself as the next factory of the world.

- Chaitanya Kulkarni