March 26th, 2025
In a strategic move to enhance domestic manufacturing, India has eliminated import duties on key components for electric vehicles and mobile phones. Finance Minister Nirmala Sitharaman announced this policy change on Tuesday, March 25, 2025, before passing the Finance Bill 2025 in parliament.
“We aim to boost domestic production and enhance export competitiveness by reducing duties on raw materials,” Sitharaman stated during the announcement.
The government has removed duties on 35 essential components for EV battery production and 28 critical parts for mobile phone manufacturing. This decision comes as India prepares to mitigate the impact of US President Donald Trump’s reciprocal tariffs set to take effect on April 2, 2025.
EV Industry Set for Growth
The duty exemption covers crucial EV battery components like:
- Lithium-ion battery cells
- Electrolytes and separators
- Battery management systems
- Cathode and anode materials
- Thermal insulation materials
This move could significantly reduce EV production costs. With batteries accounting for nearly 40% of an electric vehicle’s price, the exemption may accelerate India’s shift to electric mobility.
The market has already responded positively to this announcement. On March 26, shares of major battery manufacturers like Exide Industries and Amara Raja Energy & Mobility jumped up to 5.1% in trade on BSE.
Mobile Manufacturing Gets a Boost
The mobile phone industry will benefit from duty-free imports of:
- Display panels and screens
- Semiconductors and microchips
- Camera modules and sensors
- PCB assemblies and connectors
- Lithium-ion batteries
This aligns with India’s goal to become a global smartphone manufacturing hub. The country has already attracted major brands to set up production facilities, and this duty exemption is expected to further strengthen the sector.
Trade Relations with the US
The timing of this announcement is particularly significant as it comes just days before US retaliatory tariffs are set to take effect. By reducing import costs on critical raw materials, India is proactively working to shield local industries from potential impacts.
Reuters reported that India is considering cutting tariffs on more than half of US imports worth $23 billion in the first phase of a trade deal that the two nations are negotiating. Both countries are currently engaged in talks to resolve tariff issues and establish a bilateral trade agreement.
Economic Impact
The duty exemptions are expected to:
- Lower production costs for manufacturers
- Make smartphones and EVs more affordable for consumers
- Attract more investment in local manufacturing
- Boost export competitiveness
- Create jobs in the manufacturing sector
Last week, an Indian parliamentary committee recommended reducing import tariffs on raw materials to support local manufacturers. This policy change aligns with those recommendations and demonstrates the government’s commitment to strengthening India’s manufacturing capabilities.
As global supply chains evolve, India’s policy adjustments position the country to capitalize on shifting trends while addressing domestic market needs. The focus on reducing input costs demonstrates a commitment to building a robust manufacturing ecosystem rather than simply lowering consumer prices through imports.
