Industry seeks rethink on Chinese FDI curbs and high import tariffs
- Confederation of Indian Industry (CII) in its recent report has outlined that critical actions are required to transition India’s electronics sector from import dependent to value added manufacturing.
Highlights:
- Indian industry has urged the government to revisit its restrictions on investment inflows and the movement of skilled personnel from China
- And also to slash high import duties on electronics components as they have made Indian electronic goods globally uncompetitive vis-à-vis rivals such as Vietnam and China, rather than boosting localisation of critical inputs.
- Warning that the Production Linked Incentive (PLI) scheme for large-scale electronics manufacturing, introduced in April 2020 to offset some cost disadvantages, may soon lose its effectiveness in the face of “tariff-induced cost”.
Report : Developing India as the Manufacturing Hub for Electronics Components and Sub-Assemblies
- On the restrictions imposed in 2020, on foreign direct investment (FDI) from countries sharing land borders with India, the report said the move aimed at preventing predatory acquisitions during the pandemic has now outlived its utility and must be reconsidered with “adequate guardrails”.
- India should adopt a non-restrictive approach towards investments, component imports, openness towards technology transfer in deficient areas, ease of inward movement of skilled manpower and easing of non-trade tariffs.
- In an interdependent world, no country can aspire to produce all components for domestic consumption and a right balance between imports and exports of higher value-added products is the recipe for long term industrial sustenance
- The largest electronics manufacturer China with its $1.6 trillion international electronics trade relies on 42% imports
- India’s components demand is largely met through imports from China and short-term strategies are likely to have adverse impact on potential expansion of domestic manufacturing
- The import tariffs on priority sub-assemblies and components need to be urgently rationalized in line with key competing economies.
- Majority of tariff lines need to be brought under the level of 5% or lower to ensure that product manufacturers become competitive.
Prelims Takeaway
- External Sector
- CII