The Ministry of Commerce, Government of India, on August 3, 2023 released a notification stating that import of laptops, tablets, all-in-one personal computer, and ultra-small form factor computers and servers falling under HSN 8471 (automatic data-processing machines) shall be ‘restricted’ and their import would be allowed against a valid licence for restricted imports with immediate effect. (HSN is short for ‘Harmonised System of Nomenclature’, which provides a unique code to every product involved in international trade.)
However, import of one laptop, tablet, all-in-one personal computer, or ultra-small form factor computer, including those purchased from the e-commerce portal through the post shall be exempted from import licensing requirements, provided they pay duty as applicable. Another 20 items per consignment for the purposes of research and development (R&D), testing, benchmarking and evaluation, repair and re-export, and product development purposes, are also exempted from import licence provided that they are used only for the above-stated purposes. The restrictions shall not be applied to imports under baggage rules.
This move, according to the government, was to promote domestic manufacturing of electronics and to limit imports from China. The imports of electronics including laptops, tablets, and personal computers accounted for US$ 19.7 billion between April and June 2023. Restricting imports will not only encourage domestic production but will also reduce the current account deficit. The requirement of licences will only allow imports from trusted sources and prevent any other low-quality trades.
The strategy followed here is protecting the infant industries. In international trade, a country may impose reasonable restrictions on the import of certain goods to protect the infant industries that are still developing in the domestic market. To curb the unfair competition towards the domestic industries, imports being much cheaper, the domestic industries fail to develop majorly due to the short time available to grow and take advantage of the returns to scale and the new technologies. So, policies like these, give the domestic industries a buffer period to develop and become competitive in the international market.
Potential Impacts of the Restrictions
These restrictions will have the following impacts:
- The import restrictions may encourage domestic production in the medium and long run. Till the time the enterprises get adjusted to the licensing environment, the domestic manufacturers might benefit from it and eventually make the domestic laptops competitive.
- In the short run, it might lead to decreased supply of the restricted electronics. It may cause supply chain disruptions.
- Low availability of certain models may cause an increase in their prices till the time the enterprises apply and wait for the approval of the licences.
- The policy will also encourage any new entrants to the market and create opportunities for them.
- This policy could also enable electronic manufacturing companies like Samsung, Acer, Apple, and others to set up a manufacturing plant in India. This could boost the economy as well as provide employment opportunities.
- This policy is in line with the ‘Make in India’ scheme to promote domestic manufacturing and self-reliance.
- India, being a member of the WTO (World Trade Organization), may also be pointed out for imposing trade restrictions and preventing free trade.
Apart from that, if the domestic industries fail to take advantage of the policy and if the foreign companies do not set up a manufacturing plant in India, the consumers are the ones to bear the brunt of such a policy as it causes increase in the prices of all those products. There are some other aspects to be taken into account when industrial progress is expected.
Way Forward
The government, along with policies like this, should also make necessary improvements in infrastructure, improving credit availability, facilitating the permission required to set up industries, and other requirements for domestic industries to take advantage of such a policy. Another important aspect that will have a major impact on the domestic industries is the promotion of R&D and technological advancement. Only these can make production more efficient and give any product an edge over others with or without protection. In the long run, policies like these will not encourage domestic industries but will make them lethargic and inefficient. So, policies like these should last for a few years such that they give the domestic industries a window to become competitive. But, if continued in the long run, such policies may kill the productivity of the industries and may also result in issues, internationally.
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