The governmental move is a shot in the arm for local manufacturing and in line with PM Modi’s vision of ‘Make in India’ and ‘Vocal for Local’.
The Union government has restricted the import of laptops, tablets and personal computers with immediate effect to boost local manufacturing. The governmental move is viewed as a shot in the arm for local manufacturing and in line with PM Modi’s vision of ‘Make in India’ and ‘Vocal for Local’.
The move aims to promote domestic manufacturing of these products under the recently renewed production-linked incentive (PLI) scheme for IT hardware. Companies planning to bring laptops and computers for sale in India will now have to seek government license for their inbound shipments.
“A definite boost to ‘Make in India’ players. Most of the big brands that have manufacturing in India except premium model now have to take import license or setup manufacturing for these models in India.”
Alok Gupta, President, PCAIT
Amending the Import Policy of Items under IISN 8471 of Chapter 84 of Schedule (Import Policy) of ITC (HS), 2022, the central government sought to levy restrictions on imports of these items.
Under the amended policy, import of Laptops, Tablets, All-in-one PCs, and Ultra small form factor Computers and Servers falling under HSN 8741 shall be ‘Restricted’ and their import would be allowed against a valid license for restricted imports. However, the restrictions shall not be applicable to imports under Baggage Rules, as amended from time to time.
According to the notice issued by the Directorate General of Foreign Trade, the exemption from import licensing requirements is provided for Import of 1 Laptop, Tablet, All-in-one PCs, or Ultra small form factor Computer, including those purchased from e-commerce portals, through post or courier. Imports shall be subject to payment of duty as applicable.
“This would temporarily create a situation of positivity in channels and the supply demand gap is expected to be bridged, temporarily. We may not see a COVID times like situation, but definitely an improved business is expected.”
Vishal Sopory, Founder, Transtek Infoways Pvt Ltd
The changes allow for exemption from import license to be provided for up to 20 such items per consignment for the purpose of R&D, Testing, Benchmarking and Evaluation, repair and re-export, Product Development purposes. Further these imports shall be allowed subject to condition that the imported goods shall be used for the stated purposes only and will not be sold. Again, after the intended purpose, the products would either be destroyed beyond use or re-exported.
As far as re-import of goods repaired abroad, licence for restricted imports shall not be required for repair and return of the items. In addition, Laptops, Tablets, All—in—one Personal Computers, and Ultra small form factor Computers and Servers which are an essential part of a Capital Good shall be exempted from the import licensing requirements.
“An immediate halt to laptop imports could have wide-reaching consequences, and careful consideration, consultation with stakeholders, and perhaps a more gradual approach might mitigate potential negative impacts.”
Vimesh Avlani, MD, Graftronics
A Boost for ‘Make in India’
This move aligns with PM Modi’s vision to transform India into a global manufacturing hub, focusing particularly on the electronics sector. As discussed already, the move will boost local manufacturing across sectors, ranging from automobiles to technology.
By curbing imports, the Modi government tries to systematically cut-down the country’s dependence on foreign markets, while pumping in fresh energy into local manufacturing capabilities.
Alok Gupta, President, PCAIT, said, “A definite boost to ‘Make in India’ companies. Most of the big brands are having manufacturing in India except premium model. They have to take import license or setup manufacturing for these models in India.”
“Many refurbished laptops are coming to India and a definite dent to this business and this will further boost Indian manufacturers,” added Gupta.
“All CPU units would be banned in india. And you can import only via licensing. It will act as a catalyst for Indian brands.”
Anuj Modi, Director, AXL
Replicating Past Success in Mobile Sector
In April-June quarter alone, India imported $19.7 billion worth of electronic imports, which included laptops, PCs and Tablets. These devices amount to 1.5% of India’s total annual imports. China alone accounted for roughly half of these imports.
But now the thinking in government has changed 180 degree. It’s no longer ready to allow India to be a dumping ground for these products. Self-reliance driven by local manufacturing is the new mantra now.
To realize this, the government is leaving no stone unturned. Whether it’s making policy changes, impose import restrictions or rolling red carpets to the ones agreeing to “Make in India” or declaring even lucrative schemes laden with cashbacks.
To encourage companies to manufacture in India, the government declares incentives to the tune of $2.1 bn. If a manufacturer exceeds an annual target, it will receive even a cashback on total goods produced.
Essentially, the government’s previous tactics to shift mobile manufacturers to India and set up bases in the country, which was a robust success, is being replicated in the laptop, tablet and PC segment. Let’s not forget that even Apple capitalized on the scheme and the result is there for all to see. 7% of all iPhones today are made in India.
Now to build upon that success, India mandates licensing for laptop and tablet imports and rolling out incentives for local manufacturing on the other hand.
What It Means for the IT Industry
The policy changes would significantly impact the costs associated with importing laptops, PCs, and tablets. In the last quarter (April-June), electronics imports in the country touched a whopping USD 19.7 billion, a tad 6.25% increase over the same quarter the previous year.
Industry experts hail the new measures by the government as it reflects the government’s strong commitment to promote domestic production.
According to a report in Bloomberg, immediately after the announcements shares of local electronics manufacturers witnessed a surge. Amber Enterprises India’s share went up by 3.3%, Dixon Technologies rose by 5.5% and PG Electroplast spiked by 2.8%.
Big Brands to Face the Heat
While the policy changes bring in good news for domestic manufacturing, this would put fresh challenges for leading IT manufacturers like Dell, Acer, Samsung, Panasonic, Apple, Lenovo, or HP. As most of these companies rely heavily on imports from countries like China to meet the demands in the India market, they would be heavily impacted. These tech giants will have to either start manufacturing their laptops in India or stop importing their gadgets to India.
What it means to Customers
Industry executives said a licensing regime would mean prolonged wait times for each new model they launch. Again, the new restrictions would dampen the festive sales. Let’s not forget the announcements come at a time when the companies announce festive discounts to win customers. This means no festive discounts ahead if not an immediate price rise.
“Everyday consumers may find it more challenging and expensive to purchase laptops, which could also have an effect on education and other sectors where laptops are heavily utilized,” says Vimesh Avlani, MD, Graftronics.
“An immediate halt to laptop imports could have wide-reaching consequences, and careful consideration, consultation with stakeholders, and perhaps a more gradual approach might mitigate potential negative impacts,” adds Avlani.
Will Big Brands Cut Jobs?
Some industry insiders say they might resort to job cuts by these companies in the coming days.
After the changes come into effect, those companies without local manufacturing facilities in India have to seriously consider setting up new production units in India. This would in a way result in pushing these companies to manufacture here in order to do business here.
How Would It Benefit Channel Business
With outsourcing becoming a prominent business tactic starting with the 1980s, companies found increased profits and lower overhead costs by moving their factories to other countries. But in the past few years, organizations begin to see the benefits of local manufacturing amid rising costs and the need for sustainability.
“All CPU units would be banned in india. And you can import only via licensing. It will act as a catalyst for Indian brands,” says Anuj Modi, Director, AXL
So, how would the local manufacturing impact channel business in India. Here are some tangible benefits:
Short-term Blessings for PC Channels
When big brands will struggle to import or would have to go through the license regime triggering a price rise, it will yield temporary benefits for the channel businesses. Till their stocks last, the partners are all set to reap significant profits.
Post Covid, channels had seen a situation of supply surpassing the demand. With reports of 30% Y-o-Y decline in the PC market , challenges seemed to increase in PC business. Channel profitability took a hit as well owing to inventory carrying costs and increased competition, coupled with low demand.
“This notification is expected to temporarily create a situation of positivity in channels & the supply demand gap is expected to be bridged, even though temporarily. We may not see a COVID times like situation, but definitely an improved business is expected,” says Vishal Sopory, Founder, Transtek Infoways Pvt Ltd.
Boost for Virtual Computing
While the prospects of computer hardware faces restrictions, higher costs will discourage people from purchasing new PCs or Laptops. This would open the floodgates of opportunity for Virtual computing and cloud solution players. So good times ahead for Virtual computing.
Shortening the Supply Chain
Since the pandemic began, the supply chain has seen multiple disruptions that have slowed manufacturing. The supply chain disruptions made the supply chain much more complex. This has compelled businesses to figure out how to make their supply chains agile. Setting up local manufacturing bases as required by the proposed policy changes would take care of irrational cost escalations due to supply chain disruptions. This would significantly help channel business growth in the country. “Produce here to sell here” seems to be the governments clear message to the market players.
Building up an IT Ecosystem
keeping production at home will spur economic development in the country. The move comes in the backdrop of the government’s declaration and conclave on setting up a semiconductor hub in Gujarat. This should be seen as attempt to build up a complete IT ecosystem. The low-hanging fruits of the activities would be fostering innovation inside the country and boosting up the economy and preparing the country as a net exporter of IT items and devices.
Local Manufacturing Means Lower Price
Local manufacturing means lower price and lower price means bigger sales. And bigger sales means higher revenue for the channel business. The past few years have taught us why domestic production is critical. A pandemic-like situation and other supply chain disruptions can cripple companies. And the way out is obviously local manufacturing – a lesson so well grabbed by the union government.
An Election Year stunt?
All said and done, there’s a general belief that the policy changes could be a Election Year stunt by the BJP government. Some industry insiders believe that it could be the government’s way of supporting Jio’s upcoming laptops launch on 5th August. Whatever be the reason, at the end it’s local manufacturing which would be the clear winner.
Do let us know what you think on the newer policy changes. I can be reached at manash@accentinfomedia.com
