The laptop error

Source– The post is based on the article “The laptop error” published in “The Times of India” on 23rd August 2023.

Syllabus: GS3- Indian economy

Relevance: Issues related to manufacturing and trade

News– Recently, India banned the import of personal computers, laptops and tablets. A licence would be needed to import a computer.

What are the objectives behind this move of government?

It is essential to diminish reliance on imports and enhance domestic manufacturing. India must pressurise international corporations to establish production facilities within the country.

Security considerations come into play as well. 60% of imported computers are sourced from China. India also has a trade deficit of 100 billion dollars with China.

Why has India not emerged as a major player in computer manufacturing?

One significant factor is India’s zero duty commitment to the 1997 IT agreement with the WTO. This commitment has adversely affected the hardware industry by attracting foreign-made computers due to the absence of tariffs.

Local computer manufacturers faced challenges in competing, due to substantial drawbacks such as inadequate logistics, infrastructure, and elevated costs associated with land, labour, and capital.

In contrast, China offered substantial subsidies to foreign corporations to establish manufacturing operations within its borders.

The Government’s Production-Linked Incentive (PLI) scheme aimed at encouraging manufacturing has not yielded the desired outcomes.

Way forward-

Initiating conversation with the companies and establishing a six-month timeframe is a more constructive approach.

International manufacturers are also cautious about China and seeking alternative options. Disrupting China’s influence cannot be achieved abruptly. There exist more effective strategies to address national security apprehensions.

Amendments to the PLI scheme are imperative. Emphasising local designs and incentivizing the relocation of component manufacturers to India should be prioritised. PLI agreements should incorporate a specified end date for high tariffs.

India must adopt the manta of push export rather than stop imports.