IT hardware import policy- Making in India- Policy needs to go beyond PLI

Source: The post on India’s IT hardware import policy has been created on the article “Making in India- Policy needs to go beyond PLI” published in “Business Standard” on 21st November 2023.

UPSC Syllabus Topic: GS Paper3 Indian Economy- Effects of Liberalisation.

News: The article discusses India’s attempts to reduce IT hardware imports and increase local production. This includes offering more incentives to manufacturers and potentially restricting imports, but it’s uncertain if these efforts will significantly lower imports or boost domestic manufacturing and job creation.

What is India’s policy towards IT hardware import?

India’s IT hardware import policy involves restricting certain imports to boost domestic production. The policy is part of a broader strategy to reduce dependence on China and includes enhanced incentives under the production-linked incentive (PLI) scheme, to encourage local manufacturing in the IT hardware sector.

To this effect, the government announced in August its decision to restrict laptop imports but had to withdraw its decision over concerns raised by the industry

For more information, read here

For PLI Scheme, read article1, article2

What are the implications of India’s IT hardware import policy?

Positive Implications

Boost in Domestic Production: The policy aims to increase local manufacturing of IT hardware, as part of the government’s production-linked incentive (PLI) scheme.

Investment in Local Industry: Companies like Dixon Technologies have committed to substantial production worth ₹48,000 crore in six years, indicating a growth in domestic manufacturing.

Job Creation Potential: Moving assembly work to India, as indicated by Dixon Technologies’ investment of ₹250 crore, could create employment opportunities.

Negative Implications

Surge in Imports Pre-Policy Implementation: Anticipating the restriction, imports of computers and related products jumped 42% to $715 million in September.

Dependence on Imported Components: Even with local assembly, most components might still be imported, notably from China.

Limited Impact on Overall Imports: IT hardware imports requiring government approval were just $8.8 billion in 2022-23, a small fraction of India’s total imports of about $900 billion.

Impact on Investment: Frequent changes in government policy can lead to uncertainty and have a detrimental effect on investment.

What should be done?

Broaden Policy Focus: Beyond restricting imports, India needs comprehensive strategies to attract investments and build efficient manufacturing networks.

Enhance Value Addition: The policy could add a condition of local value addition to be eligible for PLI scheme incentives, encouraging more than just assembly in India.

Address Manufacturing Challenges: Recognize and tackle reasons why hardware components aren’t currently made in India, ensuring the PLI scheme effectively shifts part of the value chain to the country.

Improve Business Environment: Following the example of Apple’s manufacturer leaving India, the government should create favorable conditions for companies to expand operations successfully.

Promote Technology Transfer and Skill Development: Encourage partnerships and collaborations that facilitate technology transfer and skill enhancement in the IT hardware sector to build local expertise and capabilities.

Question for practice:

Examine the key goals of India’s IT hardware import policy and its implications