India’s Tariff Rate Lower Than China and Vietnam, Making It a Potential Winner
The U.S. government’s decision to impose a 27 percent reciprocal tariff on Indian imports initially triggered a sharp selloff across Indian equity markets, with sectors like IT, metals, and auto taking a hit. However, as market participants digest the full implications of this policy shift, a potential advantage emerges for India’s electronics manufacturing services (EMS) sector.
Compared to the punitive tariff rates imposed on other major U.S. trading partners—such as China (54 percent), Vietnam (46 percent), and Sri Lanka (44 percent)—India’s tariff burden remains relatively moderate. This has led analysts to suggest that Indian EMS players could emerge as beneficiaries of the shifting global supply chain dynamics.
Sonam Srivastava, Founder and Fund Manager at Wright Research PMS, highlighted this trend. “Electronics manufacturing services may benefit relatively, as India’s tariff rate is lower than those on Vietnam and China, potentially making India a more attractive destination in global supply chain realignments,” she stated.
Highlights:
India’s 27% tariff rate is lower than China (54%) and Vietnam (46%), making it a more attractive trade partner.
Indian EMS companies could gain as global supply chains shift in response to the new tariff regime.
Potential market realignment may boost domestic electronics manufacturing.
Apple’s India-Made iPhones Face Higher Costs in the U.S.
One of the key sectors that could be affected by these tariff changes is India’s growing mobile phone export industry, particularly Apple’s iPhone assembly operations. A report by Emkay Global points out that over half of India’s electronics exports to the U.S. comprise mobile phones, predominantly iPhones manufactured in India and shipped to the U.S. market.
The imposition of reciprocal tariffs could make these products significantly more expensive for American consumers. Emkay Global’s research highlights an important contrast in tariff structures: while India levies a 15 percent duty on fully assembled phone imports, the U.S. has traditionally maintained a zero-tariff policy on such goods. If America were to mirror India’s 15 percent duty as part of its reciprocal tariff strategy, it would drive up the price of India-assembled iPhones for U.S. buyers.
Implications for Apple and the Indian Smartphone Market:
Over 50% of India’s electronics exports to the U.S. are mobile phones, mainly iPhones.
New tariffs could raise the cost of India-made iPhones for American consumers.
Potential impact on Apple’s supply chain and pricing strategies in the U.S. market.
PLI Scheme to Spur EMS Sector Growth and Boost Domestic Manufacturing
To counteract potential trade disruptions, the Indian government has been actively supporting its electronics manufacturing sector through policy measures. Last month, the Ministry of Electronics and Information Technology announced a new Production-Linked Incentive (PLI) scheme to encourage non-semiconductor electronics manufacturing, marking a strategic push to enhance India’s role in global electronics production.
The scheme, with a financial outlay of ₹22,919 crore, is expected to create over 91,600 direct jobs and attract investment worth approximately ₹59,350 crore. Union Electronics and IT Minister Ashwini Vaishnaw emphasized the importance of passive electronic components in India’s long-term manufacturing strategy, stating, “Passive components are approved under the Electronics Component PLI scheme. It has a total package of ₹22,919 crore, to be implemented over six years.”
Leading EMS companies such as Dixon Technologies, Kaynes Technology, and Amber Enterprises are poised to benefit from these incentives. Additionally, the increasing focus on reducing reliance on China through the “China+1” strategy aligns well with India’s manufacturing ambitions.
PLI Scheme Highlights:
₹22,919 crore allocated to boost non-semiconductor electronics manufacturing.
91,600 new jobs expected to be created through the initiative.
Key beneficiaries include Dixon Technologies, Kaynes Tech, and Amber Enterprises.
Challenges Remain as India’s Market Share in High-Tech Sectors Lags Behind China
Despite the potential benefits, some analysts caution that India has yet to capitalize on China’s weakening hold in various industries. A report by Emkay Global indicates that approximately 75 percent of China’s exports comprise high-complexity products, compared to just 45 percent for India.
While China has lost market share in lower-value industries such as textiles, footwear, and jewelry, it has managed to strengthen its presence in high-tech sectors such as electric vehicles, advanced machinery, and engineering equipment. Meanwhile, India’s gains have been limited primarily to basic commodity exports.
The report further notes that, aside from telecom equipment, India has struggled to replace China’s exports in key areas. In fact, India has even lost market share in gems, jewelry, and textiles—sectors where it traditionally had a strong foothold.
Challenges Identified:
China still dominates high-tech exports, while India’s share remains limited.
India has failed to significantly replace China in major global supply chains.
Sectors like gems, jewelry, and textiles have seen India’s market share decline rather than grow.
The Road Ahead: Can India Capitalize on Trade Shifts?
While the imposition of U.S. reciprocal tariffs presents challenges for Indian exports, it also offers an opportunity for India to enhance its position in the global electronics manufacturing sector. With a more favorable tariff structure compared to China and Vietnam, India’s EMS firms could attract increased foreign investment and supply chain realignments.
However, for India to fully capitalize on this potential, structural improvements in high-tech manufacturing and R&D investment will be essential. The success of the PLI scheme, along with further policy initiatives to strengthen the domestic value chain, will play a crucial role in determining whether India can emerge as a dominant force in global electronics production.
Potential Growth Drivers:
Government support through the PLI scheme to enhance domestic electronics manufacturing.
India’s lower tariff rates relative to China and Vietnam may attract global investors.
Expansion of the EMS sector could position India as a competitive alternative to China in the global supply chain.
