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India has eliminated import duties on essential components crucial for mobile phone production, Finance Minister Nirmala Sitharaman revealed during the annual budget announcement on Saturday. This decision is expected to significantly enhance local manufacturing efforts and provide a boost to companies like Apple (AAPL.O) and Xiaomi (1810.HK).

Over the past six years, India’s electronics production has skyrocketed, more than doubling to reach $115 billion in 2024, positioning the country as the world’s second-largest mobile phone manufacturer. In this competitive landscape, Apple dominated the Indian smartphone market in 2024, capturing a 23% share of total revenue, closely followed by Samsung at 22%, according to Counterpoint Research.

The revised policy eliminates the 2.5% tax on components integral to mobile phone assembly, including printed circuit board assemblies, camera module parts, and USB cables. These changes are particularly timely as the global trade environment faces potential turbulence due to U.S. President Donald Trump’s tariff threats. While Trump promotes his “America First” initiative to attract manufacturing back to the U.S., India is poised to capitalize on escalating U.S.-China trade tensions, aiming to increase its global supply chain participation.

Internally, the IT ministry had cautioned that without reducing tariffs, India risks falling behind countries like China and Vietnam in the race for smartphone exports, as reported by Reuters last year. In her previous budget, Sitharaman had called for a review of the customs duty structure to simplify tariffs and facilitate smoother trade.

This duty review also seeks to address “inverted duty structures,” where tariffs on raw materials or intermediate goods exceed those on the finished products. India’s intricate tariff system has frequently been cited as a barrier to effective domestic production and a source of trade disputes.