The Indian government in the Union Budget 2025-26 proposed to reduce the number of Basic Custom Duty (BCD) rates on several mobile phone and TV parts. It has also placed a strong emphasis on promoting domestic manufacturing, particularly in the electronics sector.
A series of measures have been announced to rectify the inverted duty structure, incentivize local production, and reduce reliance on imports.
Promoting Component Manufacturing
The government is also keen on developing a robust ecosystem for mobile phone component manufacturing. To this end, the BCD on inputs/parts and sub-parts of PCBA, camera module, connectors, and inputs or raw materials for use in the manufacture of wired headsets, microphones and receivers, USB cables, and fingerprint reader/sensors of cellular mobile phones has been reduced from 2.5% to 0%.
Inverted Duty Correction
The budget addresses the long-standing issue of inverted duty structure in the electronics industry. To encourage local manufacturing of Interactive Flat Panel Displays (IFPDs), the basic customs duty (BCD) on IFPDs has been increased to 20%, while the duty on open cells, a key component, has been reduced to 5%. Further, to incentivize the manufacturing of open cells in India, the BCD on their parts has been exempted.
Boosting TV Panel Production
The budget also aims to boost local production of TV panels by reducing the BCD on specified inputs/parts (chip on film, PCBA, glass board/substrate cell) for use in the manufacture of open cells of LED/LCD TVs from 2.5% to 0%.
Incentivizing EV and Mobile Battery Manufacturing
To further promote the manufacturing of lithium-ion batteries in the country, 35 additional capital goods for EV battery manufacturing and 28 additional capital goods for mobile phone battery manufacturing have been added to the list of exempted capital goods.
Rationalizing Duty on Ethernet Switches
To prevent classification disputes and encourage domestic manufacturing, the budget proposes to reduce the BCD from 20% to 10% on carrier-grade ethernet switches, making it at par with non-carrier-grade ethernet switches.
Impact
These measures are expected to have a positive impact on the Indian economy by boosting domestic manufacturing, reducing import dependence, promoting “Make in India”, encouraging investments and the reduction in input costs could potentially lead to lower prices for electronic products such as mobile phones and LED TVs benefiting consumers. However, experts suggest that immediate price cuts on smartphones may not occur due to other market factors.
Industry’s reaction
Ravi Kunwar, VP and CEO, HMD India and APAC, said:
The Union Budget 2025-26 presents encouraging prospects for the technology and digital infrastructure sector. We applaud the Indian Government for reinforcing India’s vision for self-reliance and innovation-driven growth in electronics manufacturing. Reducing BCD to 5% on open cell components and including 28 additional capital goods for mobile battery fabrication will strengthen local manufacturing and further generate employment in the sector.
The formation of the National Manufacturing Mission and investment in skilling initiatives will contribute to India’s global competitiveness and facilitate the commitment to climate-friendly development. These measures, coupled with tax reforms and incentives, create a strong foundation for sustainable growth in India’s electronics ecosystem.
CP Khandelwal, CEO, PR Innovation, Brand Custodian of Amazfit India, said: Accelerating tech self-reliance by boosting display manufacturing and lithium-ion battery production
The Budget 2025’s tech-forward policies signal India’s ambition to dominate the global electronics value chain. Eliminating BCD on open cell components for displays isn’t just a tariff tweak—it’s a strategic unlock. By making India a cost-competitive hub for advanced display manufacturing, we’re poised to cut reliance on imports for LCD/LED panels, which currently account for 80% of the $7 billion display market. This will catalyze local R&D in next-gen technologies like OLED and MicroLED, critical for smartphones, wearables, and smart TVs.
Equally transformative is the lithium-ion battery push. Adding 28 capital goods for mobile batteries will fast-track domestic cell manufacturing, addressing a critical gap where India imports 90% of its lithium-ion needs. For the wearables and smartphone ecosystem, this means shorter supply chains, faster innovation cycles, and sustainable cost efficiencies. India’s future will be driven by innovation, self-reliance, and a bold vision to lead the global tech revolution.
Rajeev Singh, Managing Director, BenQ India and South Asia, said:
We are encouraged by the government’s announcement of the National Manufacturing Mission, which represents a significant step towards enhancing the ‘Make in India’ initiative. This mission’s focus on supporting small, medium, and large industries, along with its emphasis on clean technology manufacturing, aligns perfectly with our commitment to sustainability and innovation.
Further, the decision to increase the basic customs duty on interactive flat panel displays is a crucial step in addressing the inverted duty structure. This move will foster local manufacturing and support the growing demand for advanced educational technologies, ultimately enhancing innovation in learning environments.
We look forward to collaborating with the government and industry stakeholders to capitalize on these opportunities and contribute to India’s digital transformation.
Ujjwal Sarin, Founder – Nu Republic: Strengthening Make in India
The Union Budget’s National Manufacturing Mission is a pivotal step in strengthening ‘Make in India’ through policy support and clean tech innovation. With a strong focus on domestic manufacturing of solar PV cells, EV batteries, and high-voltage equipment, India is set to lead in sustainable technology.
Addressing the inverted duty structure, the increase in customs duty on interactive flat panel displays will boost local production and investment in advanced display technologies. Additionally, the establishment of five National Centers of Excellence for Skilling and a ₹500 crore AI Centre of Excellence in education will bridge the industry-academia gap, fostering a future-ready workforce.
These initiatives reinforce India’s path to becoming a global leader in advanced manufacturing and digital innovation. We welcome these efforts and look forward to collaborating with stakeholders to drive technological self-reliance and growth.
Prashant Bora, MD & CEO of OTEK (A Bora Multicorp Venture), said:
The FM’s proposal to reduce of the customs duty on open cells and other critical electronics components to 5% will help boost the Make in India initiative. This will help electronics brands to support customers with more cost-effective pricing, leading to enhanced scalability and growth. Furthermore, the budget’s emphasis on positioning India’s aspirations to become a global electronics hub through the production-linked incentive (PLI) schemes for electronics and IT hardware manufacturing, further boosted by PM Narendra Modi’s target of $500 billion by FY30, coupled with the government’s bid to strengthen India’s startup ecosystem with an additional INR 10,000 crore Fund of Funds will be a catalyst for growth going forward.