Mint Explainer: Why is India using import curbs as a policy tool?

Restrictions on laptop imports are largely aimed at boosting the government’s flagship production-linked incentive (PLI) scheme for hardware manufacturing
Restrictions on laptop imports are largely aimed at boosting the government’s flagship production-linked incentive (PLI) scheme for hardware manufacturing

Summary

  • After importing computer hardware and peripherals worth 7,255 crore, and electronic components worth 8,200 crore from China last fiscal, the government is keen on achieving greater self-reliance in manufacturing and boosting exports

India's new import restrictions on laptops, tablets and personal computers, with some exemptions, will kick in on 1 November, according to orders issued earlier this month. Reports have suggested that use of import restrictions as a policy tool could also be expanded to cover other electronic items. Mint takes a look at the intent behind the import restrictions.

What is the macroeconomic imperative for import restrictions?

India has been trying to accelerate its economic growth rate after the pandemic through various policy measures, such as the government taking the lead on capital expenditure in the hope of attracting private investments.

Another economic growth engine – net exports – has been in negative territory since the first quarter of FY22, with total exports lagging behind total imports. Substituting certain imports with goods produced locally where possible could help improve the net-exports situation and while increasing self-sufficiency and creating jobs. Reducing the current-account deficit is also a key priority for the government.

Why are electronics on the priority list for import curbs?

Electronics is a key industry in which the government wants to step up local production to curb rising imports. Also, India's foreign trade policy advocates the concept of trusted value chain in electronics, which will help address concerns related to bugs and data theft from equipment used in India.

According to the commerce ministry, India imported computer hardware and peripherals worth 7,255 crore, and electronic components worth 8,200 crore from China last fiscal. The government is keen on achieving self-reliance in manufacturing and also tapping greater export opportunities.

Could the import curbs result in a WTO dispute?

Experts believe that large electronics exporters could drag India to the WTO. However, the government has ruled out the possibility, saying countries are allowed to take such short-term measures in the interest of national security.

Explaining the government’s move, Global Trade Research Initiative (GTRI) said that unlike in the case of mobile phones and information and communications technology (ICT) goods, India could not have raised the import duty on laptops, PCs and tablets owing to the Information Technology Agreement, which it signed in 1997. Therefore, the only way to curb imports was to require firms to obtain a government licence before importing.

Will the move help the ongoing PLI push?

Restrictions on laptop imports are largely aimed at boosting the government’s flagship production-linked incentive (PLI) scheme for hardware manufacturing. In May the government introduced a revised 17,000-crore PLI scheme for IT hardware to attract manufacturers of laptops, tablets, and other hardware to India, after the first version, which had a lower allocation, failed to take off.

India imports about $8 billion worth of laptops and tablets every year. Mint reported that 44 companies have already registered for the revised incentive scheme for IT hardware, and two companies, including HP, have already applied. The deadline to apply for the scheme has been extended to August 30.

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