To promote domestic electronics manufacturing and reduce surging imports, India has implemented import restrictions on laptops, tablets, and servers. Under the new regulations, importers are now required to obtain permits for bringing in laptops, tablets, all-in-one personal computers, ultra-small computers, and servers. This measure comes into immediate effect and has been announced by the Directorate General of Foreign Trade (DGFT). However, certain personal computers designated as "capital goods" might be exempted from this requirement, as per the agency's notification.
This move is expected to have a significant impact on companies like Apple Inc., Dell Inc., Lenovo, and HP, which heavily rely on imports. It aligns with India's broader strategy to curb imports and encourage local manufacturing, which is a key objective of the government's Make in India program. Official figures show that laptop imports have reached $8 billion as of March 2023.
In an effort to attract manufacturers of laptops, tablets, and other IT hardware to India, the government introduced a revised production-linked incentive (PLI) scheme worth ?17,000 crore in May.
India has also implemented quality control orders (QCO) as a measure to reduce imports from China, which amounted to $27.6 billion in FY23 for electronics.
According to Deepa Kumar, the head of Asia-Pacific country risk at S&P Global Market Intelligence, the recent decision to restrict IT hardware imports seems to be part of a broader strategic initiative aimed at promoting domestic manufacturing in crucial sectors. India intends to enhance its position in global supply chains, and the next probable step would be incentivizing both domestic and foreign companies to produce these goods within the country.
According to a government official, the restriction on IT hardware imports does not imply a total prohibition but rather requires a licensing condition for imports. The official notification specified that imports would be allowed under a "valid license" and would not fall under the scope of 'Baggage Rules' for international travel. The primary motive behind this move is to ensure citizens' security, especially with the rapid expansion of the internet. The government aims to provide a secure environment for digital citizens, protecting them from potential security risks associated with certain hardware that could compromise sensitive and personal data.
Although China was not explicitly mentioned, the official emphasized the importance of sourcing from trusted and reliable partners as a top priority. Another crucial reason for implementing import restrictions is to safeguard India's IT infrastructure from foreign cyber threats. It's worth noting that the current restrictions go beyond the scope of the existing baggage rules, which permit the import of one old and one new laptop.
The decision is expected to cause disruptions in the supply chain, according to computer manufacturers.
"The brands are not pleased with this decision, especially those that do not have any manufacturing operations in India. It will significantly disrupt supplies. Even for those that produce a few models locally, they will now need to expand their local manufacturing capabilities. The licensing requirement means that every imported consignment will necessitate a license, making the process cumbersome, time-consuming, and affecting product availability for consumers. Clearly, this move aims to promote manufacturing in India," shared an executive from a laptop manufacturing company, who requested anonymity.
On the other hand, a second industry executive involved in the contract manufacturing ecosystem pointed out that this move could benefit companies like Dixon Technologies and Optiemus Electronics Ltd, which are already engaged in local laptop production. With this restriction, brands will be compelled to explore local options instead of relying on imports.
"This decision has proved highly advantageous for us. We are currently in discussions with several brands interested in initiating local assembly or manufacturing of their laptops. Our main focus now is to strategize how to efficiently expand our capacities to meet the anticipated surge in demand," revealed A. Gururaj, the managing director of Optiemus Electronics.
However, another executive from a prominent e-commerce marketplace expressed concerns that the order might adversely affect consumers due to a potential short-term increase in laptop and personal computer prices. "While we do not foresee any out-of-stock situations in the short term, we expect prices to rise, impacting consumers. Some high-end models, which are already supplied in limited quantities, may face more specific consequences. Additionally, larger sellers who list their inventory on online marketplaces may experience a significant business impact," the individual stated on the condition of anonymity.
Regarding concerns about potential disruptions in imports, the official clarified that the movement of goods would align with the new foreign trade policy, which includes a transition provision.
"The transition provision stipulates that items with a bill of loading dated before the notification can still be imported. For example, if a shipment commenced 10 days ago, the bill of landing would reflect that date, which is well before today's announcement. Furthermore, we are making arrangements so that Letter of Credits (LCs) established between two partners before today's date will permit them to import goods into India until 31 August. After this period, they will need to adhere to the licensing agreement," the official explained.
"The licensing portal is currently operational, but for IT hardware, a few additional columns may need to be incorporated, and this process will be completed within a few days. The primary condition for approval is that actual users will be permitted to obtain licenses. Moreover, traders with prior experience will also be eligible to apply," he added.
Despite reaching out to Apple, Dell, HP, and Lenovo, no responses were received until publishing this news information.
