NEW DELHI: WTO’s recent ruling terming India’s high import duty on certain electronics items as illegal might queer the pitch for domestic manufacturing of these products, and spook foreign investors. Experts say even if the impact may not be severe, it could surely put a dent in local manufacturing of electronics goods.
The World Trade Organisation has termed India’s high import duty on information and communications technology (ICT) products as illegal. In 2019 the EU, Japan and Taiwan had challenged the import duties in the range of 7.5-20% on certain electronic products. While ruling in favour of the EU, the WTO observed that India’s violation has affected EU exports of such goods by up to €600 million annually. If India complies with the ruling, the country will have to reduce the import duty on these items.
Tarun Pathak, research director at Counterpoint Research, said the impact of this ruling will not be severe in the near term but will create a dent in the overall Make in India initiative.
“Foreign investors will be treading cautiously in making further investments in India and this may also hamper the speed in getting the FDIs in the ICT space,” he says adding that if the decision on the ruling affects the duty structure in India, it could impact the momentum of local value addition. If India loses the appeal in the higher court, the impact will be much more severe.
Ajay Sahai, Director General & CEO of the Federation of Indian Export Organizations (FIEO), said India should challenge the ruling as the products on which India has imposed tariffs were non-existent at the time of signing of the information technology agreement (ITA).
“Moreover, we are at a critical stage to attract global investment in such a sector, develop domestic capabilities and ancillaries and make India a new hub for such exports,” said Sahai. However, Indian officials maintained it won’t impact the smartphone PLI scheme, the most successful scheme in the country.