Aatmanirbhar, how?

This month, the government added laptops, tablets and personal computers to a list of imports that are restricted, which ranks them alongside TV sets, air conditioners and tyres. These items can now be imported only after getting a licence from the Directorate General of Foreign Trade (DGFT). Officials said that the measure was aimed at safeguarding the security of citizens and added that imports will be allowed only from trusted sources. It was mentioned that some of the hardware could have security related issues and that they could compromise sensitive data (read surveillance, similar to spyware installed on mobile phones).

However, the move was set to particularly impact the short term availability of laptops from global brands that rely on assembly abroad. There is the fear of price surge also, especially in the run-up to the festive season. The DGFT notification came just days after the Centre’s PLI scheme for hardware failed to find any takers, despite the incentive amount being increased by 131% to Rs 17,000 cr. The need to check the import of electronic goods was offset by the fact that India had committed to zero-duty imports under the WTO’s IT Agreement (ITA1). In fact, until 2001, India abided by a policy of import licencing which was dismantled after a WTO ruling. Having followed a liberal regime so far, the Centre has re-employed licencing as a weapon to restrict imports.

The impetus to curb imports is questionable as the nation is heavily dependent on the international market for its computing machines. Imports of these devices added up to $10 bn last year which is 13% lower than 2021-22. The government was hoping that the curbs would boost indigenous electronic manufacturing, and possibly inspire some foreign companies to opt for domestic manufacturing.

A day after the curbs were set, the government denied pushing India back to the Licence Raj era, while opting to defer its implementation by three months amid fears that the curbs could limit supplies in the market and push up prices. Going into damage control mode, officials said DGFT will issue licences within minutes. Now, it makes sense to take stock of the e-manufacturing scene as it stands today. Not one nation in the world is self reliant in making consumer electronics as production of components is split across geographies based on comparative cost advantages.

India is powerhouse, but only when it comes to assembly operations in the electronic value chain. We will still need critical components for these machines, as complex value chains cannot be rolled-out in the blink of an eye. So, the curbs don’t really present a recipe for self-reliance.

Stakeholders have also urged the Centre to mandate testing norms with regard to products/components coming from China in order to allay security concerns, considering a huge chunk of imports do come from our next-door neighbour, China followed by South Korea and Vietnam. Analysts have cautioned the government that knee-jerk measures threatening the ease of doing business that global majors expect of India, could be a sure shot way to set the economy back as these companies might go scouting for more conducive regions. The Centre must implement measures to drive larger segments of the electronic supply chain to India, and not elsewhere. What was lost in China due to geopolitical conditions could be gained in India’s digital value chain, if only the government can rein in its unpredictability on policies and its backbreaking tax regime.