WTO ruling on Indian duty, if upheld, could hit local production of mobiles

A WTO panel recently ruled that India had violated global trade rules after the European Union challenged the levy of 7.5% and 15% import duty imposed since 2017 on a wide range of IT products, including mobile phones (where the duty was further raised to 20%) and components to curb imports in a bid to increase domestic production.

Now, India may have to reverse the duties imposed on these products to zero. New Delhi does have the recourse of an appeal. WTO members take their trade disputes to the Dispute Settlement Body (DSB) in case of a difference, which then sets up a panel through mutual consent. However, in the scenario that it loses the appeal, reversing duties to zero may cause India’s electronics manufacturing push to lose the momentum it has achieved, experts said.

They said while the ruling won’t impact the ongoing PLI scheme and the phased manufacturing program (PMP), it may give Chinese handset makers, which are not part of the PLI scheme, a window to slowly start importing completely boxed units once again.

“Our industry has grown by leaps and bounds after the duty protection regime which checked the import of poor-quality Chinese phones dumped in the Indian market,” said Pankaj Mohindroo, chairman of industry body India Cellular and Electronics Association. “Following the duty protection to mobiles, significant investments in manufacturing has happened by companies like Oppo, Vivo, Samsung and Apple, bringing domestic manufacturing to Rs 3 lakh crores…All these developments are sought to be destroyed by the three panel rulings,” Mohindroo added.

Without effective disincentives in place, the Chinese players will have no reason to keep making in India, and may restart importing fully assembled devices, Mohindroo cautioned.

According to industry estimates, Chinese smartphone brands manufacture $23 billion worth of devices, every year in India, or 50-55% of total local production. In a zero-duty regime, this may more-than-halve to $10 billion per year, Emails to top Chinese handset makers – Xiaomi, Oppo, and Vivo – did not elicit a response till press time.