Imposition of Customs Duty on Mobile Phones to Boost MSMEs' Contribution to Exports & Job Creation

Strongly supporting the imposition of 2.5% Basic Customs Duty (BCD) on mobile phone components in the Budget 2021-22, Electronics and Computer Software Export Promotion Council (ESC), which represents the MSME manufacture exporters in the ICT sector said that the step would promote localization of the electronic component industry, exports, employment and realization of Atmanirbhar Bharat.

"The imposition of customs duty is designed to make India a strong assembling hub, and will considerably cut down the component imports, which form a significant percentage of the local manufacturing/ assembly including in the case of mobile phones, thereby enhancing foreign exchange retention," says Sandeep Narula, Chairman, ESC.

Narula said that India has to first emerge as a strong ICT manufacturing hub to accelerate exports. That is possible only when the product and component industry grow in tandem. Also, the component industry, by its very nature is low capital base, labor intensive and "plug and play" ideally suited for the Indian MSMEs.

"Our reckoning is that global markets for electronic components will be close to $ 350 billion by 2025 and India can have a considerable share in this segment, which is presently insignificant," he added. The present ecosystem in the country is conducive for the growth of the electronics and components industry thanks to the emergence of 5G networks, artificial intelligence, the Internet of Things (IoTs), policy boosts from the government like Digital India and Smart Cities, wider broadband connectivity and e-governance programs.

For any segment to grow, expand and to make global footprints, ESC chairman said Phased Manufacturing Programme (PMP) is the ideal route followed world-wide. The turnaround of mobile telephone sector in India and how the sector in a relatively short timeframe emerged as a strong export segment has been due to focused attention given to PMP, wherein duty structure has been calibrated to achieve the objective - higher duty on finished goods and lower duty on components. By increasing the duty on components, the government is wanting to create a conducive atmosphere for mobile phone companies to source components domestically, so that they can cut down the transaction cost and inventories.

The ESC chairman stressed that in the coming 3 to 5 years, India's component segment would grow leaps and bounds availing the production linked incentives schemes (PLIs) in as much as the growth in the mobile phone sector. This would unleash a radical transformation in the digital base of the country, which has been at the receiving end for quite some time, strangulating its growth potentials.