The Centre shocked consumers and industry last week with its announcement that import of laptops, personal computers (PCs), tablets and servers will be only on prior license with immediate effect. After some pushback from those impacted, the effective date has been pushed to November 1. Officials have come up with several explanations as to why imports of computers cannot be freely allowed.  One is national security, as hardware from ‘non-trusted’ sources could come with ‘built-in security loopholes’ endangering sensitive personal and enterprise data. If this is a reference to imports from China, there is no easy solution. Chinese brands make up over half of the annual computer imports valued at $8 billion.

A second and more plausible explanation is that the licensing requirement is necessary to nudge global computing giants to Make-in-India. But as the entire ecosystem required to manufacture high-end computing devices cannot spring up in short order, brands keen to tap this market may adopt workarounds.  One appreciates the intent behind this move, which is to reduce import dependence for computing devices but it may not play out the way the government wants it to. In July 2020, the Centre had announced similar licensing norms for colour television sets and gave out sops for imported components. The three years since have seen India’s import dependence for finished colour television sets fall from 36 per cent to zero. Most global TV brands have tied up with local contract manufacturing units. But these are mainly into assembly, with high-value parts such as open cells still being imported. A similar script may play out in computers, where global brands hire contract manufacturers to assemble semi-knocked down units in India.

The Centre has had a PLI (Production Linked Incentive) scheme for local manufacture of computing devices in place since February 2021 with few takers. It was relaunched in May 2023 with a larger outlay of ₹17,000 crore, additional incentives for localisation of components and more flexibility to manufacturers on investment thresholds. But large global players such as Apple have so far refused to bite the bait, preferring to manufacture in countries like Vietnam, which have Free Trade Agreements with India. FTAs allowing duty-free IT hardware imports from ASEAN are a big impediment to the Centre’s Make in India plans. But addressing this may require more nuanced solutions than going back to licensing, which only offers opportunities for rent-seeking.

Unlike colour TVs, laptops, PCs, tablets and servers have wide application in education, research and public services. While announcing the PLI in May 2023, the government flagged that India’s PC penetration was just 15 per 1,000. This needed to improve for better governance, access to education and productivity. It noted that India-based electronics manufacturers suffered a handicap due to inadequate infrastructure and supply chain, high financing costs, inadequate skill and power availability etc. The focus should be on addressing these gaps, and redesigning PLIs if needed.

comment COMMENT NOW