A Damocles sword hangs above laptop importers

Source: The post is based on the article “A Damocles sword hangs above laptop importers” published in “Live mint” on 23rd October 2023.

Syllabus: GS3- Economy- Effects of liberalisation on the economy

News: The Indian government has changed its policy on importing laptops, mainly from China. Instead of licenses, an “import management system” will quickly approve imports. The goal is to boost local production and reduce reliance on China. This might affect laptop prices and quality in India.

What is India’s new “import management system”?

India’s new “import management system,” set to start from November 1. Under this system, companies must register the quantity and value of their imports, along with the source country. As of now, the government won’t reject any import requests for laptops. Instead, the data gathered will be used for monitoring purposes. This change aims to ensure a trusted and secure digital ecosystem in the country.

Previous System: Before this, on August 3, 2023, a licensing regime for these imports was introduced, potentially causing supply chain disruptions by enabling the government to delay or reject import requests and imposing a license requirement for each shipment.

Impact on Tech Giants: Major companies like Dell, HP, Apple, Samsung, and Lenovo had concerns about the past restrictions.

Why did the Indian government change its laptop import policy?

Reduce Dependence on China: A significant portion of laptop imports come from China. By altering the policy, India aims to diminish Chinese dominance in its key markets.

Promote Local Production: The new “import management system” supports India’s broader policy goal of self-reliance, known as “Atmanirbhar Bharat”. Over time, companies are expected to increase local manufacturing.

National Security Concerns: The system ensures imports come from “trusted sources”. If challenged at the World Trade Organization (WTO), India might cite “national security” as a reason, much like the US did with steel and aluminium tariffs.

Shift in Global Trade Patterns: With global geopolitical divides growing and past norms of globalization eroding, India is adapting its trade policies to the changing landscape.

What will be the impact of this policy change?

Positive Impact:

Boost to Local Production: With this policy change, laptop marketers are likely to increase the share of locally produced items. This aligns with India’s aim for self-reliance.

Controlled Imports: By monitoring imports through the “import management system”, the government ensures that products are sourced from “trusted vendors”, ensuring national security.

Flexibility for Importers: The new system allows importers to source items from multiple overseas vendors across different regions using a single authorization, offering greater flexibility.

Negative Impact:

Potential Price Increase: Historically, policy-enforced import substitution has made local products costly, as seen in India’s pre-1991 economy.

Dependency on Fiscal Support: To gain an edge in hardware, there might be a reliance on fiscal subsidies, which, if not reduced over time, could keep products uncompetitive.

Uncertainty for Hardware Sellers: The policy acts as a check, ensuring they align with India’s broader goals, which may create operational challenges.

Licence Raj: License Raj or Permit Raj was a system of regulations and licenses that were required to set up and run a business along with the accompanying red tapes, delays and corruption between 1947 and 1990 in India.

Under this it was mandatory to obtain a license from the government to start a business.

Terminology used

Atmanirbhar Bharat: Read here – https://forumias.com/blog/pm-aatmanirbhar-swasthya-bharat-yojana/

Question to practice:

Critically analyse the Indian government’s shift from a licensing proposal to an “import management system” in the context of its broader goal for an “Atmanirbhar Bharat” and the implications for trade relations with China.