With immediate effect, imports of laptops, personal computers (PCs), tablets, and servers would only be permitted with a prior permission, the Center shockingly announced this week, shocking both consumers and business.
The effective date has been delayed until November 1 due to opposition from individuals who will be affected. Officials have offered a number of justifications for why imports of computers are not permitted at will.
One is national security, as hardware from "untrusted" suppliers may have "built-in security loopholes" that put confidential personal and business information at peril. There is no simple fix if this is referring to imports from China. Over half of the $8 billion in annual computer imports come from Chinese manufacturers.
The licensing requirement is required to persuade global computing behemoths to Make-in-India, according to a second and more tenable reason. However, because the full ecosystem needed to produce high-end computing products cannot quickly emerge, firms that are interested in entering this market may use workarounds.
While it is admirable that the government is making this change to lessen its reliance on imports for computing hardware, it may not have the desired effect. Similar licensing requirements for color television sets were announced by the Center in July 2020, along with exemptions for imported parts.
Since then, India's reliance on imported finished color television sets has decreased from 36% to ZERO. The majority of international TV brands have partnerships with regional contract manufacturers. However, they are mostly involved in assembly, and expensive components like open cells are still imported.
Computers may follow a similar pattern, with multinational companies using contract manufacturers to put semi-knocked-down systems together in India.
Since February 2021, the Center has offered a PLI (Production Linked Incentive) scheme with few takers for domestic manufacturing of computing products. In May 2023, it was reintroduced with a higher budget of $17,000 crore, more incentives for component localization, and increased manufacturing flexibility with regard to investment criteria.
Large multinational corporations like Apple, however, have so far refrained from biting the hook in favor of manufacturing in nations like Vietnam that have free trade agreements with India.
FTAs that permit duty-free imports of IT gear from ASEAN are a significant barrier to the Center's Make in India aspirations. But dealing with this might need for more subtle answers than returning to licensing, which just provides chances for rent-seeking.
Contrary to color televisions, laptops, PCs, tablets, and servers are widely used in public services, research, and education. India only has 15 PCs per 1,000 people, the government noted while unveiling the PLI in May 2023. To increase government, education access, and productivity, this was necessary.
It stated that poor supply chains and infrastructure, high financing costs, a lack of skilled labor, limited access to power, etc., hurt Indian electronics firms. The emphasis should be on closing these gaps and, if necessary, redesigning PLIs.
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