IT import curbs: Licence Raj or Make in India?

 Free imports will now be allowed only till 31 October.  (AFP)
Free imports will now be allowed only till 31 October. (AFP)


In a surprise move, the government last week reintroduced licensing and ended free imports of IT hardware. Many reasons have been cited for this step. Mint explains the possible rationale and the potential impact of the measure going forward:

Is licensing back in India?

Yes, at least when it comes to importing IT hardware. On 3 August, the government issued a notification that restricts free import of laptops, tablets, personal computers and servers. Importers, the notification said, needed a licence to do so with immediate effect. The next day, it clarified that a transition period would be given, and the notification would come to effect from 1 November. Free imports will now be allowed only till 31 October. This is one of the very few instances where the government has reintroduced controls through licensing after India liberalized its economy way back in 1991.

What is the rationale behind this move?

While the government has refuted that it is returning to “Licence Raj", it has given some reasons. Minister of state for electronics and IT Rajeev Chandrasekhar said the move will ensure trusted and verifiable systems. Apart from national security and protecting Indians from data breaches, another official attributed the regulation to narrowing the trade balance with China, which makes up 77% of IT hardware imports. In 2022, India’s trade deficit with China crossed $100 billion for the first time. There are others who say the licensing will improve India’s self-sufficiency in electronics production.

Graphic: Mint
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Graphic: Mint

What’s the state of India’s IT hardware manufacturing?

Only 35% of IT hardware goods that India consumes are produced locally. In 2022-23, India imported laptops and personal computers worth about $6 billion. Overall electronics imports touched $27.6 billion. The Centre aims to cut such dependence and build a strong electronics manufacturing base through production-linked incentive schemes.

How has IT hardware done in PLI?

The first version of the PLI scheme for IT hardware got a poor response as firms found it unattractive. In May this year, the Centre came out with a revised scheme offering incentives worth 17,000 crore for setting up units to make laptops, tablets and other IT hardware. Some say the move to licence imports is an attempt to get more companies to sign up for the revised PLI scheme which is open till the month-end. The government denies it, claiming it has already received 44 PLI applications.

Will licensing make computers pricey?

The notification on Thursday created chaos with customs officials starting to hold up imports. This forced players HP, Apple, Dell, etc. to stop shipments. Things eased when the Centre clarified the rule would come to effect only from 1 November. Experts say computers will become costly if the licensing process is cumbersome and will impact supply. The Centre says the directorate general of foreign trade portal, which will handle the applications, will take just five minutes to issue the licences.

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