Surge in PC, notebooks sales seen
Today there is a lot of appreciation for the sector among the policymakers. Things have definitely become a lot more positive.
Moumita Bakshi Chatterjee
New Delhi, Dec. 30
A healthy growth in IT consumption topped by a strong uptake in notebook buying — 2007 was a year that continued to move computers into households, smaller towns and cities.
As notebooks, in particular, touched sub-Rs 25,000 price-levels they were lapped up by homes and SMEs. The education vertical too emerged as a key driver for PC consumption in the country; with privately managed schools and colleges adopting PCs at a brisk rate, computer penetration in this segment continued to gain traction.
As the industry boots up to reach its targeted 25 per cent annual growth, Business Line spoke to the MAIT Executive Director, Mr Vinnie Mehta, on the challenges and opportunities ahead.
How do you rate 2007 for IT hardware industry in terms of consumption, sales etc?
For me, 2007 was the year of mobility. Growth in notebook consumption has been very encouraging. While the desktop has been growing at 20 per cent, notebooks are doubling, of course on a much smaller base. While we consumed about a million notebooks last year, this year it should be closer to two or even higher. The overall growth in the PC market would be about 25 per cent. For the year 2007-08, we should be clocking around 8 million units of PCs.
And 2007 from a policy perspective?
I am glad the industry has started to get adequate attention from the Government. Last year, we had the Fab policy that is tuned to attract investments in highly capital-intensive parts of the hardware value chain such as semiconductors, solar cells, OLEDs and storage devices. We have begun well, but need to market these well as the window here is only for three years. We are working with the Government on a broader policy for electronics manufacturing that will also help spur consumption in the domestic market. We hope that will be announced soon.
What are the changes you’d like to see in Indian IT hardware industry in 2008? What needs to happen at the environment/industry/policy level to bring about these changes?
Frankly, we are not looking for too many changes. The year 2007 has been good, there has been steady growth and no policy-related disruptions. The industry has matured enough to absorb minor policy transients that happen during the course of the year and also, I think, unlike a couple of years ago when we had to, at times, explain what hardware industry was all about, today there is a lot of appreciation for the sector among the policymakers. Things have definitely become a lot more positive. The last couple of years have witnessed steady growth in consumption; also, investment has started to happen. Things are on a roll.
What would be really good is if we could ignite the home market. While we witnessed good growth in this sector, it is still a quarter of the market, and we would like it to be half of the market. The industry will have to come up with innovative applications and marketing solutions to improve the value perception of the products for this price-sensitive sector. While we are happy about the investments in the hardware sector, it is limited to mostly assembly levels. It is a challenge as to how to deepen this to the component level.
What does hardware industry expect from the Budget?
Providing a favourable duty regime with appropriate incentives for component manufacturers in India would have a positive impact on the industry.
Any benefit to the industry should be explored from the perspective of the entire value chain to avoid any tax blockages, if such benefits are to have an optimum impact. Continuation of the existing tax structures for IT products, including the benign rate of 12 per cent excise duty on PCs, should be seen in this light.
Computers are at present classified as Capital Goods under the CENVAT Credit Rules, 2004, whereby the credit is available only if the computer is used in the factory of the manufacturer of the final products. The scope of utilising the credit of the CVD/Excise duty paid on the PC should be widened to include any use within the business, whether in the factory or in the office of the manufacturer.
Also, PCs in India currently face a four per cent CST for both manufacturers and service providers. Dealers/resellers can get a concessional CST rate of three per cent on providing the statutory forms (Form-C), though the tax is non-creditable for any class of buyer. Further, there are various service sectors such as banking and insurance, hospitality and leisure, education, and so on, that are large PC consumers but do not currently qualify for the beneficial rate of three per cent CST; these should be allowed the same benefit.
Also, manufacturing companies cannot issue Form-C for any IT purchases that are used anywhere other than in their factories. Thus, the impact of CST cost creates an additional barrier to PC sales. The Government should, therefore, immediately abolish CST on IT products.