Government's Flip-Flop on Laptop imports may leave Investors Bewildered

The Government's changing stance on the import of laptops and tablets may leave investors scratching their heads.

In a sudden twist, on September 26, 2023, Rajeev Chandrasekhar, Minister of State for Electronics and IT, announced (during the Times of India Right To Excellence - Tech Summit 2023) that there will be no licensing regime for laptop and tablet imports.

This abrupt reversal comes after the Directorate General of Foreign Trade (DGFT) issued a notification on August 3, 2023, imposing restrictions on imports of laptops, tablets, Wi-Fi dongles, smart card readers, and other computer-related products, with a total import value of $8.8 billion in FY2023. The DGFT mandated that firms importing these products would require a license or permission for imports starting November 1, 2023.

To help stakeholders, the Government conducted several consultations, with participation from leading multinational corporations. The latest such inter-ministerial consultation took place on September 25.

In addition to mentioning that the Government will not implement a licensing regime for laptop and tablet imports, the minister also spoke of Government’s position on three critical issues. These issues and the GTRI's response to each issue is as under:

1-DGFT notification was not communicated properly.

Minister's remarks-DGFT notification was not communicated properly. There is no such thing as licensing. And it never was there. But unfortunately, the way it came out after it was notified was that we are trying to create a licensing regime. It came out in a language that was certainly not consistent with our intent. It became licensing instead of what it really was: an import management system.

?

GTRI observations-The DGFT notification restricting import of Laptops etc., could not have been issued without written communications from MeitY. DGFT is merely the focal point that notifies trade-related changes for all administrative ministries. It's like a post office.

2-?The Government will soon introduce an import management system.

Minister's remarks-Government will soon introduce an import management system (IMS) which will encourage domestic manufacturing and ensure a trusted supply chain. IMS will allow for imports based on domestic manufacturing and exports. The new system will allow firms to have "certain amounts of import", but "based on their domestic manufacturing and exports. No licence, just a very automatic process. And built into that is a design incentive that says you have more and more incentives to manufacture locally. If you continue to import more and more from geographies that are not trusted, the Government can put additional conditions and scrutiny. Essentially, the message for companies is that we want a trusted supply chain.

GTRI observations-Allowing firms to have "certain amounts of import", "based on their domestic manufacturing and exports and import from trusted geographies amounts to import restriction. DGFT must first restrict the imports for operationalizing such a system. Such a system cannot be automatic and will require the Government to publish objective criteria beforehand. It will be like an online import licensing system.

?

3-No to import licencing

Minister's remarks-"There never will be a licensing regime under PM Modi. He has never believed in it. He doesn't believe in it now, and he certainly will not believe in it going forward".

GTRI observations-Most countries restrict imports as per needs. Name of hon'ble PM should not be dragged into this.

India must pursue policies for promoting domestic production of Laptop and other electronics products.

Global firms may feel uncomfortable about import restrictions, as it will compel them to invest in India to maintain their current level of business. Few have got their home countries to voice opposition. But, India, as one of the world's leading economies, must navigate its policies independently. It's worth noting that the US and EU have taken more stringent actions to pursue their own self-interests.

The case for local laptop manufacturing in India is compelling. China dominates the PC and laptop market with an impressive 81% share, amounting to a staggering $130 billion (as of CY2022 data). ?Such over dependence on one country poses future supply risk as Covid has demonstrated. In this conext, India's efforts to bolster local production of mobile phones, laptops, etc are in the right direction. However, India must avoid incentivizing superficial shell assembly companies.

This wavering stance on import regulations may make India a subject of mockery on the global stage. The Government must provide a clear and consistent policy to instil confidence in domestic and international stakeholders.

Newspapers will not carry such policy flipflop that really hurt India.

Repost for max circulation

?