What’s in Today’s Article?

• Introduction
• Import Measures (Policy Measures, WTO Commitments, Challenges, Import Dependency, etc.)
• Way Forward

Introduction:

• India's heavy reliance on imported IT hardware, such as laptops and PCs, has driven the government to explore strategies to boost domestic manufacturing.
• This includes linking import permissions to domestic capacity expansion and introducing a credit system for imports once production meets critical thresholds.

Strategic Policy Measures:

• Import Restrictions Tied to Domestic Manufacturing:
  • The government plans to emulate the successful strategy used in the tyre manufacturing sector.
  • In 2020, restrictions on new pneumatic tyre imports led to global players like Bridgestone, Michelin, and Goodyear investing over ₹1,100 crore in local facilities.
  • A similar conditional easing of import norms is being considered for laptops and PCs, tied to commitments for domestic production.
• Credit System for Imports:
  • A credit system for IT hardware imports may be introduced, with detailed policies expected as domestic production gains momentum.

WTO Commitments and Global Trade Concerns:

• WTO Constraints:
  • India cannot impose higher duties on IT products, as they are bound by zero-duty commitments under the WTO’s Information Technology Agreement (1997).
• Global Pressure:
  • China dominates the global IT hardware market, with an 81% share of PCs and laptops and exports worth $163 billion in 2022.
  • Leading US-based companies like Apple, Dell, and HP, which produce in China, have raised concerns about India’s import monitoring system.
  • Japan and China have also formally expressed opposition to India’s laptop import licensing measures.
• India's Security Goals:
  • While trade partners fear trade restrictions, the Indian government emphasizes that its policies aim to achieve self-reliance for national security, not impose undue barriers.

India’s Import Dependency:

• In FY24, India imported electronic components worth $34.4 billion, making it the fifth-largest imported commodity.
• Imports from China ($12 billion) and Hong Kong ($6 billion) accounted for over 50% of total electronic imports.
• Over the last five years, imports from China and Hong Kong have far exceeded those from South Korea, Japan, Taiwan, and ASEAN nations combined.

Domestic Production Challenges:

• Slow Progress in IT Hardware Manufacturing:
  • Despite initiatives like the revamped Production Linked Incentive (PLI) scheme (2023), domestic production of laptops and tablets has yet to scale up significantly.
  • 27 companies, including Dell, HP, Lenovo, and Foxconn, have been approved under PLI 2.0 but are still in the early stages of production.
• Extended Import Authorizations:
  • Import restrictions under the Import Management System (IMS) have been extended until December 31, 2025, to prevent shortages and price hikes.

Way Forward:

• To reduce import dependency and achieve self-reliance, the government is pursuing a multi-faceted approach:
  • Strengthening Local Manufacturing:
    • Accelerating PLI incentives and enforcing policies that link imports with domestic capacity expansion.
  • Diversifying Trade:
    • Exploring alternative supply chains to reduce dependence on China and Hong Kong.
  • Encouraging Investments:
    • Creating a favourable ecosystem for both domestic and foreign players to invest in manufacturing facilities.
  • Balancing Global Commitments and Domestic Needs:
    • Aligning policies with WTO obligations while protecting strategic interests.