Laptop Decision Doesn’t Compute

Source: The post is based on the article “Laptop Decision Doesn’t Compute– If creating a domestic industry for computers is the goal, tariffs would have been a better policy instrument than reimposing Nehru-Gandhi era licensing” published in “Times of India” on 12th September 2023.

Syllabus: GS3- Economy- Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.

News: The author discusses India’s choice to reintroduce licensing on specific tech imports, possibly to safeguard domestic industries. However, this move raises concerns about reverting to older trade policies. The author also stresses the importance of India enhancing its manufacturing sector for economic growth and job opportunities.

Why did India reintroduce licensing on tech imports?

Discreet Discrimination: Licensing could be a tool to discreetly target imports from specific countries without explicitly naming them.

Targeting China: China is a significant supplier, accounting for 54% of India’s tech imports in the HTS 8471 category in 2022.

Protection Over Retaliation: The objective might be to protect domestic industries rather than to retaliate against China.

Rapid Response: Licensing offers a quicker protective measure than safeguard or antidumping duties, which require investigations.

What are the other options available to India apart from licensing?

Tariffs: Instead of licensing, India could have simply relied on tariffs to regulate imports.

Discriminatory Tariffs: If India wanted to target specific countries, it could impose higher tariffs on them, like how the US restricted its steel and aluminum imports in 2018.

Safeguard Duties: For protection against sudden surges in imports, such as the rise in tech imports from $7.3 billion in 2020 to $11.1 billion in 2022.

Antidumping Duties: Used to counteract unfairly low-priced imports, though they require an investigative process.

What are the implications of reintroducing licensing on tech imports?

Possible Violation of WTO Agreements: The reintroduction of licensing might breach WTO agreements as this method is from a bygone era.

Potential for Discreet Discrimination: Licensing could allow India to quietly target specific countries, such as China, without having to overtly name them.

Unclear National Security Benefits: Restricting tech imports for national security reasons seems unlikely as potential threats, like malware, could be introduced through various components.

Minimal Economic Impact on China: Even though China accounted for 54% of India’s tech imports in 2022, India’s tech imports only comprise a small fraction of China’s total exports.

Protection of Domestic Industry: The main reasoning might be to safeguard India’s domestic industries from surging imports, which rose significantly between 2020 and 2022.

Potential Return to Old Trade Practices: Reintroducing licenses raises concerns of reverting to restrictive trade policies, signaling potential future challenges for India’s trade landscape.

What should be done?

Reevaluate Trade Policies: India should reassess the reintroduction of older trade tools like licensing and consider more effective and modern trade measures.

Expert Committee Consultation: After the 2024 elections, the new government should set up an expert committee to advise on policies that can boost manufacturing growth rates.

Focus on Manufacturing: Emphasize the importance of manufacturing for rapid productivity growth, job creation, and skill enhancement.

Employment Strategy: Address the current pattern where 85% of the workforce is in low-output sectors. Encourage the growth of larger enterprises that yield higher productivity.