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What happened
The Indian electronics sector is urging the government to continue its supportive policies as US-China trade relations ease, which poses a threat to India's export competitiveness. Following a recent dialogue between US President Donald Trump and Chinese President Xi Jinping, the US halved tariffs on Chinese fentanyl, narrowing India's cost advantage by 10 percentage points. The India Cellular and Electronics Association (ICEA) expressed concerns that if these tariffs are further reduced or eliminated, it could significantly impact India's attractiveness for investment and production under the Production Linked Incentive (PLI) scheme. Historically, India has benefited from a favorable position against China due to US tariffs on Chinese goods, which has driven a surge in electronics exports. However, the recent changes could reverse these gains and restore China's competitive edge in global manufacturing.
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Key insights
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Tariff Reduction Impact: Halving of tariffs on Chinese goods threatens India's export competitiveness.
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Government Support Needed: The electronics industry seeks continued government backing to maintain its edge.
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PLI Scheme at Risk: Investment and production under the PLI scheme could be adversely affected.
Takeaways
The Indian electronics industry faces significant challenges due to the normalization of US-China trade relations, necessitating ongoing government support to preserve its competitive advantage in global markets.