The Union Budget 2025-26 introduces significant measures designed to enhance manufacturing and export competitiveness within the electronics sector, with the goal of putting India’s mobile and electronics industry on the global map.
Key Announcements and Their Impact
- Tariff Rationalization: The budget emphasizes strengthening India’s electronics manufacturing ecosystem through the rationalization of tariffs on key inputs and components, creating a more competitive cost structure and encouraging deeper integration with global value chains.
- Removal of BCD on Mobile Inputs/Parts: The removal of the 2.5% Basic Customs Duty (BCD) on major mobile inputs/parts or sub-parts for Printed Circuit Board Assembly (PCBA), Camera Module, Connectors, Wired Headsets, Microphone and USB Cables, Fingerprint Reader and Scanners is a welcome step. This move will enable manufacturing, remove ambiguity, and increase the competitiveness of manufacturing.
- IFPD Duty Correction: The correction of the 20% duty on Interactive Flat Panel Displays (IFPD) aligns the display with the color television category, which will increase local manufacture and assembly.
- BCD Rationalization for Open Cell of LCD/LED Panels: BCD rationalization from 2.5% to Nil on inputs and parts for manufacturing open cells of LCD/LED panels will boost domestic manufacturing of open cells by creating a reasonable differential duty between the finished open cell and its parts.
- Lithium-Ion Cell Battery Waste: Reduction of BCD on Lithium-Ion Cell battery waste from 5% to Nil will make the industry very competitive and enable the recycling of battery waste for the extraction of critical materials.
- Broad-basing of Materials for Mechanical Parts: The budget has broad-based the materials that can be imported duty-free in the manufacturing supply chain to include all possible materials and their components and alloys and composites. This modification recognizes the relentless march of technology and innovation formulations in the mechanical parts of mobile phones.
- Touch Panel/Cover Glass Assembly: The omission of Touch Panel/Cover Glass Assembly for use in the manufacture of mobile phones removes confusion and facilitates the manufacturing of display assembly.
- Exemptions on Capital Goods: Exemptions of BCD on specified capital goods for manufacturing lithium-ion cells for EVs and mobile phones will enable building Lithium Ion cell manufacturing capabilities in India and enhance competitiveness.
- Direct Tax Liberalization: Increasing the exemption slabs for personal income tax will support consumer products such as smartphones, laptops, color televisions, and other electronics.
- Export Promotion and National Manufacturing Missions: Setting up of Export Promotion Mission and National Manufacturing Mission will strengthen India’s manufacturing capabilities by creating a business-friendly environment, ensuring access to advanced technology, developing a skilled workforce, and providing easy access to export financing.
Overall Impact and Implications
- Enhanced Competitiveness: The rationalization of tariffs on key inputs and components creates a more competitive cost structure and encourages deeper integration with global value chains.
- Supply Chain Resilience: Duty exemptions on critical minerals and capital goods reinforce supply chain resilience and help India compete effectively in international markets, attracting higher foreign investment.
- Boost to Domestic Consumption: Measures like the enhanced income tax rebate under the new tax regime will boost disposable incomes, stimulating domestic consumption, a key driver for electronics demand.
- Attracting Investments: These initiatives reflect a strategic push towards achieving the Prime Minister’s vision for USD 500 billion of electronics manufacturing by 2030 and provide an impetus for domestic value addition, export growth, and job creation.
- Global Positioning: By aligning policies with global standards and supporting large-scale manufacturing, India is well-positioned to achieve its ambitious targets and solidify its place on the global stage.