Licence to sell

Restricting computer imports by licence a bad idea

The Centre shocked consumers and industry last week with its announcement that
import of laptops, personal computers (PCs), tablets and servers will be only on prior
licence with immediate effect. After some pushback from those impacted, the effective
date has been pushed to November 1. Officials have come up with several
explanations as to why imports of computers cannot be freely allowed. Oneis national
security, as hardware from ‘non­-trusted’ sources could come with ‘built-­in security
loopholes’ endangering sensitive personal and enterprise data.

If this is a reference to imports from China, there is no easy solution. Chinese brands make
up over half of the annual computer imports valued at $8 billion. A second and more
plausible explanation is that the licensing requirement is necessary to nudge global
computing giants to Make-­in-­India. But as the entire ecosystem required to manufacture
high­-end computing devices cannot spring up in short order, brands keen to tap this market
may adopt work-arounds. One appreciates the intent behind this move, which is to reduce
import dependence for computing devices but it may not play out the way the government
wants it to. In July 2020, the Centre had announced similar licensing norms for colour
television sets and gave out sops for imported components. The three years since have
seen India’s import dependence for finished colour television sets fall from 36 per cent to
zero. Most global TV brands have tied up with local contract manufacturing units. But these
are mainly into assembly, with high-­value parts such as open cells still being imported. A
similar script may play out in computers, where global brands hire contract manufacturers to
assemble semi­-knocked down units in India.

The Centre has had a PLI (Production Linked Incentive) scheme for local manufacture of
computing devices in place since February 2021 with few takers. It was relaunched in May
2023 with a larger outlay of ₹17,000 crore, additional incentives for localisation of
components and more flexibility to manufacturers on investment thresholds. But large global
players such as Apple have so far refused to bite the bait, preferring to manufacture in
countries like Vietnam, which have Free Trade Agreements with India. FTAs allowing
duty­-free IT hardware imports from ASEAN are a big impediment to the Centre’s Make in
India plans. But addressing this may require more nuanced solutions than going back to
licensing, which only offers opportunities for rent-­seeking.

Unlike colour TVs, laptops, PCs, tablets and servers have wide application in education,
research and public services. While announcing the PLI in May 2023, the government
flagged that India’s PC penetration was just 15 per 1,000. This needed to improve for better
governance, access to education and productivity. It noted that India­based electronics
manufacturers suffered a handicap due to inadequate infrastructure and supply chain, high
financing costs, inadequate skill and power availability etc. The focus should be on
addressing these gaps, and redesigning PLIs if needed.

(494 words/THBL)