Giving another boost to manufacturing in India, Government of India has further increased the customs duty on smartphone import from 15-percent to 20-percent. Which is to say imported phones like Apple’s iPhones and Google’s Pixel will get more expensive at the start of next financial year (April 2018).
The announcement comes only a few weeks after GOI increased customs duty from 10-percent to 15-percent (in December 2017). The move will motivate smartphone manufacturers to expand manufacturing in India. In 2017, India imported $42 billion worth of telecom equipment and other electronic goods in India and the Government will increasingly try to reduce the number moving forward.
2018 Budget Highlights
- Customs duty on mobile phones has been increased from 15 percent to 20 percent.
- Customs duty on TVs has also been increased.
- Customs duty on Smartwatches has been increased to 20 percent
- In December 2017, customs duty was increased from 10 percent to 15 percent.
- The policy change is to encourage manufacturing in India.
- Apple will bear the maximum brunt. 88-percent iPhones are imported in India.
- iPhone prices expected to increase by another Rs. 2000 to Rs. 3000
By now, most manufacturers are already invested in assembling phones in India, which is now the second largest smartphone market in the world. Apple is the one that will take the worst hit since they import 88 percent of their phones in India. The new policy will also impact players like Reliance Jio and others who are known to source feature phones from China.
The price of iPhone models is expected to increase by another 2,000 to 3,000 INR. And with Apple recently cutting retailer margin in India, it would be hard for sellers to absorb the increased prices.
Apart from smartphones, duty on Imported TVs has also increased by 5 percent. Other sectors that Make in India will focus on are biotechnology, chemicals, electronic system design and manufacturing, leather, textiles, food processing, gems & jewellery, construction, shipping, and railways. The government will also push 5G adoption and plans a global rollout in 2020 in line with global markets.
The move has received a mixed reaction from the smartphone industry so far. Vikas Aggarwal, General Manager, OnePlus India has welcomed finance minister announcement of hike in customs duty.
“Since the announcement of Make in India program 3 years back, over 85% of smartphones sold in country are now produced locally. So, this is opportune time to introduce next set of regulations to attract investment in the manufacturing sector and establish India as a global hub for electronics. At OnePlus, we are fully committed to the Indian market and welcome the proposed regulations. Currently, all OnePlus smartphones are produced locally and we are already exploring ways to further increase the share of local manufacturing to ensure there is minimal cost impact of any new regulations to the end customer.”
Ajey Mehta, Vice President India, HMD Global seems unfazed with additional customs burden:
“HMD Global continues its strong emphasis on PM Modi’s Make in India campaign. While the import duties for mobile phones increased to 20%, along with a 15% duty on key components, this will have a minimum impact on our business, as all of our current portfolio of Nokia phones are manufactured in India.”
Sanjeev Agarwal, Chief Manufacturing Officer, LAVA International was quite optimistic:
“We welcome the announcement on custom duty increase in mobile phones from 15pc to 20 pc in the Union Budget 2018-19. This will provide a big boost to the Make-in-India campaign by the government and will be instrumental in achieving our country’s vision of making India a global hub for mobile phone manufacturing. Local manufacturing will create more job opportunities, benefitting the youth and contributing towards the overall growth of the economy. I congratulate the government on this landmark decision.”
On the other hand, Mr Syed Tajuddin, CEO, Coolpad India wasn’t as optimistic:
“This budget is pretty regular with a mix bag of things, nothing path-breaking or outstanding to boost the manufacturing sector. For agricultural and rural economy there is some really positive news, but not great hints for the Consumer durable and mobile handset industry. The increase in custom duty from 15% to 20% will definitely hamper the cost to customer, especially when it comes to getting repairs for the high-end devices. While increase in custom duty on handsets will compel brands to manufacture or assemble more in India, still there is not great support for local ecosystem for manufacturing spare parts. And this lack of local spare part manufacturers will mean a tough situation for mobile handset brands. Hence a brand is compelled to import most of the spare parts and customers have to bear some burden of it.”