Make in India: Curbs on computer imports

Sep 29, 2023

India imposed import restrictions on laptops, tablets, and servers to establish the country as a hub for electronics manufacturing amid surging imports. Effective immediately, importers will need permits to bring in laptops, tablets, all-in-one personal computers, ultra-small computers, and servers, a notification by the Directorate General of Foreign Trade (DGFT) said. Personal computers (PCs) designated “capital goods" may be exempt, the agency added.

The move, which is set to significantly hit companies such as Apple Inc., Dell Inc., Lenovo, and HP that are hugely reliant on imports, is part of broader Indian efforts to curb imports and promote local manufacturing under the government’s Make in India programme. Imports of laptops have increased to $8 billion as of March 2023, according to official figures.

In May, the government introduced a revised ₹17,000 crore production-linked incentive (PLI) scheme for IT hardware to attract makers of laptops, tablets, and other hardware to India.

India has also taken several other steps to curb imports from China by introducing quality control orders (QCO). Electronics imports from China was at $27.6 billion in FY23.

“The latest decision to restrict imports of IT hardware appears part of a broader strategic push towards encouraging domestic manufacturing in key sectors, where India is hoping to increase its share in global supply chains. Incentivising domestic and foreign companies to manufacture these goods in India will be the likely next move," said Deepa Kumar, the head of Asia-Pacific country risk at S&P Global Market Intelligence.

A government official clarified that the restriction does not mean prohibition, and that imports are allowed but with a licensing condition. The official notification said that the imports would be allowed against a “valid licence" and is outside the purview of ‘Baggage Rules’ in case of international travel. “This move is primarily to safeguard the security of the citizens. The internet is going to expand in a much faster way. Digital citizens should have an environment where they are not exposed to machines which might have security risks. Keeping in mind that some of the hardware could potentially have security-related risks and could compromise sensitive and personal data," the official said.

Without naming China, the official said sourcing from trusted and reliable partners will be the topmost priority. Securing India’s IT infrastructure from foreign cyber threats was another reason for the import restrictions, the official said. “Under the current baggage rules, one old and new laptop is allowed, and the current restriction has kept the baggage rule out of its purview."

Computer makers said the decision will disrupt supplies.

“No brands are happy with this decision, especially those that don’t make anything here. It will disrupt supplies. And those that make a few models locally will have to expand their local manufacturing capabilities. Licensing means that for every consignment that a brand imports, they will have to take a licence; so it will be very cumbersome, time-consuming and will make product availability a problem for consumers. So, clearly, it is a push to make in India," an executive at a laptop maker said, requesting anonymity.

A second industry executive, part of the contract manufacturing ecosystem, said the move would benefit companies like Dixon Technologies and Optiemus Electronics Ltd that were already making laptops locally, as brands will have to look at local options instead of imports.

“This decision has been very beneficial for us. We’re already in talks with a few brands who want to begin local assembly or manufacturing of their laptops. We just have to plan how to scale up our capacities to meet the demand surge," said A. Gururaj, the managing director of Optiemus Electronics.

Another executive at a large e-commerce marketplace said the order could hurt consumers as there could be a short-term spike in the prices of laptops and personal computers.

“While we don’t expect an out-of-stock situation in the short term, we do expect a spike in prices, and consumers could get impacted. Maybe some high-end models that are anyway supplied in lower quantities could also be specifically impacted. Meanwhile, large sellers that list their inventory on online marketplaces could see a significant impact on business," the person cited above said on the condition of anonymity.

On apprehensions about disruptions in imports, the official said that the movement of goods would be in accordance with the new foreign trade policy, which has a transition provision.

“The transition provision says that if the bill of loading is before the date of notification, those items can come in. For instance, if a shipment has started 10 days back, the bill of landing will be 10 days back, much before today’s date. We are also making a provision that wherever LCs had been opened before today’s date between two partners, they will be allowed to bring in their partners to India up to 31 August. And beyond that, they will have to bring in a licensing agreement," the official said.

“The licensing portal is already active, but specifically for IT hardware, there will be a few more columns which might be required to be added. It will be up and running in a few days. Pre-requires will be that actual users will be allowed. Over and above, traders who have had experience in the past will be allowed," he added.

Queries sent to Apple, Dell, HP, and Lenovo did not elicit a response till press time.