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Why has the government called for PC import curbs?

Relevance:

GS Paper-3 

Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Recent Update:

On August 3, the government restricted the import of laptops, tablets, all-in-one personal computers, ultra-small form factor computers and servers. The import of these products would be allowed against a valid license for restricted imports. Initially meant to be enforced with immediate effect, a revised order the next day deferred the enforcement until November 1.

What does the order state?

• Import of all items categorized under the harmonized System of Nomenclature (HSN) 8471, that is, automated data processing machines and units, would be restricted from November 1.
• A valid license would be required to import them for sale to consumers. Exemption to licensing requirements would be extended in four circumstances.
• First, purchasing a single unit of the mentioned products on an e-commerce website that are being brought into the country through post or courier. It would only draw relevant duties.
• This also applies to (reimport of) products meant for repair and return. Permission has been given to import up to 20 such items in a consignment for purposes entailing research and development, testing, benchmarking and evaluation, repair and re-export or product development purposes.
• Following their intended use, the products would either have to be destroyed beyond use or re-exported. Finally, items may be imported if they serve as an essential part of an entity’s capital good.

What is the purpose of the move?

• The key objective is to reduce the dependence on imports, ensure the country has access to trusted hardware and systems and increase domestic manufacturing of products.
• On domestic manufacturing, the government had introduced the production-linked incentive (PLI) Scheme 2.0 for IT hardware in May this year. It was explained in the gazette that with domestic demand for electronics hardware expected to rise to approximately $300 billion by FY2026, “India cannot afford to bear the rapidly increasing foreign exchange outgo on account of import of electronics.”

Is domestic production growing?

• Domestic production of electronic goods, as per industry estimates, increased to $87.1 billion in 2021-22 from $49 billion in 2016-17 — registering a compound annual growth rate (CAGR) of 15%. Further, as per figures from the Commerce Ministry, the country’s imports with respect to the products in discussion stood at approximately $10.1 billion in FY 2022-23, about 13% lower on a year-over-year basis.
• It was observed in May that over the years IT hardware manufacturing capability and capacity in India has “progressively declined and many units have either ceased operations or are operating at low capacities.” The demand for laptops and tablets were being largely met through imports. As per market intelligence firm International Data Corporation’s report for Q1-23, HP commanded the highest share in the domestic PC market at 33.8%, followed by Lenovo (15.7%), Dell (13.9%), Acer (12.3%), Asus (6.6%) and all others combined at 17.6%.

What happens next?

• Concerns mostly revolve around accessibility to stocks and a potential impact on prices. Global companies operating in India have sought that the implementation be deferred by 9-12 months to enable them time to ramp up domestic production and understand the licensing process.
• Bharath Shenoy, Senior Market Analyst for PC Devices at IDC India, said, with the deadline extended to October-end, “We expect vendors to pump inventory across channels till October-end so that there are no disruptions during the festive sales season.”
• For the longer term, Mr. Shenoy states that vendors would be able to arrange for the required licences by October-November. Further, he explained that most of the big vendors except Apple and Asus have local assemblies (Apple manufacturer Foxconn and a couple of other suppliers manufacture iPhones in India) where they assemble desktops and/or some budget notebooks. “They will fast-track the local assembly process and try to build the ecosystem around it at the earliest.

“Asus and Apple might also eventually start local assembly,” he observed. About the potential impact on prices, Mr. Shenoy contends that vendors won’t increase prices for the next three months as it is the festive sales season. “However, customers will advance their purchases anticipating price increase going forward.

Source: https://epaper.thehindu.com/ccidist-ws/th/th_delhi/issues/47535/OPS/GBUBK36V2.1+GV5BK3P13.1.html