It hardware import policy needs stability
In yet another policy rollback, the government watered down its recent diktat restricting imports of seven electronic products including laptops. Instead, it unveiled a new contactless import authorisation system that requires IT hardware companies to reveal more details about the goods.
The change of heart ends nearly three months of uncertainty among tech giants such as Apple, HP and Dell, who produce elsewhere but sell in India. Perhaps to correct the imbalance, India took an extreme step announcing an import ban in August but deferred its implementation until October 31 after facing an immediate backlash from the producers. The latest move replacing import restrictions with an import authorisation scheme to keep track of all inbound shipments resolves the missing link of having a verified supply chain amid increasing cybersecurity threats.
The issue of import overdependence, mainly on China, remains. The government’s humble attempts to reduce imports and increase domestic production through the $2-billion production-linked incentive (PLI) scheme tailored for hardware firms yielded less than the desired investments. So the deadline was extended to August 30, and that is when the authorities punched producers with a flash import licence notification out of nowhere.
One may equate this as a case of frightening children into obedience, but in hindsight, it seems to have had the intended effect with as many as 38 IT hardware companies applying under the PLI 2.0 scheme to make in India. The government hopes these investments will help achieve the ambitious target of catering up to 70-80 per cent of the country’s IT hardware needs through domestic production over the next three years.
However, replicating the production success seen for products such as TVs and smartphones may not be easy and needs time. Electronic goods need an end-to-end component manufacturing ecosystem, which few countries other than China can boast of. It is this superiority that makes China one of the largest exporters of electronic products.
The good news is that India is one of the largest consumers of IT products, but the transition from an electronics assembly hub to a manufacturing destination is going to be arduous. Though India’s industrial policy rightly centres on boosting local production, creating employment and reducing import reliance, it should avoid misadventures like the recent import bans that only breed uncertainty for investors.