Encourage local makes of electronic goods
The government’s import restrictions on seven electronic products, including laptops, seem to be a resolute attempt to boost domestic manufacturing and reduce reliance on Chinese imports. The Directorate General of Foreign Trade’s new diktat appears like a gentle nudge to companies to make in India and sell in India, as global tech giants like Apple, Dell, HP and Samsung, who produce these products elsewhere, now cannot do business without an import licence. Incidentally, Apple recently chose Vietnam to make laptops in, passing over India, despite its $2-bn Production-Linked Incentive (PLI) scheme tailored for hardware companies. Even though PLI 2.0 has higher incentives than PLI 1.0, it saw few takers, forcing the government to extend the deadline to apply for the scheme till August 30.
Industry associations claim the restrictions were imposed without prior consultations. They fear delays of new launches, product shortages and, importantly, raised prices ahead of the forthcoming festive season. At $8.8 bn worth of imports in FY23, the seven shortlisted products account for about 1.5% of India’s total annual imports. Data from the Ministry of Commerce and Industry shows that more than half, or $5.1 bn worth of imports, were sourced from China alone. On the other hand, domestic production remains negligible, and the government senses an opportunity to encourage local firms and, in the process, achieve the targeted $300 bn annual electronics production by 2026.
That said, the swashbuckling move of import restrictions is a departure from India’s often-used duty hikes to discourage imports and encourage domestic production. It’s true that such decisions successfully altered the production landscape of mobile phones and TV sets. For instance, the high tariffs on mobile phones catalysed outputs, with domestic production jumping from Rs 18,000 crore in FY15 to Rs 2,25,000 crore in FY20. India is now emerging as a net exporter of mobile phones, specifically the high-end iPhones, which might touch 50% of Apple’s global iPhone production by 2027. Likewise, in 2020, the import restrictions on fully-built TV sets helped achieve 100% local assembling. But personal computers and laptops have complex components. Replicating the production success of TVs and smartphones may be possible in the long run, though not guaranteed. Efforts should be made to avoid disruptions as these products are critical parts of everyday life.