Govt decision on IT hardware to create multi-billion dollar local production capacity: Industry experts

Representational image. Photo credit: Song_about_summer/Shutterstock

New Delhi:The government decision to curb imports of laptops, tablets and PCs, along with Rs 17,000-crore IT hardware PLI, will create multi-billion dollar local production capacity and import dependency will nosedive in the next 2-3 years, industry players said on Friday.

The government has made it mandatory for importers of laptops, tablets and certain types of computers to get a valid licence, with immediate effect for security reasons and to promote domestic manufacturing.

It is likely to give some more time to industry players to align their imports in line with the order.

The Directorate General of Foreign Trade (DGFT), in a notification, said exemption from import licensing is provided for up to 20 items per consignment for R&D, testing, benchmarking and evaluation, repair and return, and product development purposes.

"The pull to manufacture IT hardware, especially laptops and tablets, in India, started during PLI 1.0, and it bloomed further with PLI 2.0. We expect local production of IT hardware devices in India will meet 60-65 per cent of domestic demand in the next 2-3 years," Optiemus Electronics Ltd (OEL) Managing Director A Gururaj told PTI.

OEL has permission to produce IT hardware under the old production-linked incentive scheme and will apply for PLI 2.0, for which the last date is August 30.

Around 44 companies have registered to make IT hardware devices in India under PLI scheme 2.0, out of which two global companies have submitted their applications. US-based Hewlett Packard Enterprise last month signed an initial pact with VVDN Technologies, under which they plan to produce high-end servers worth USD 1 billion in the next 4-5 years.

Research Director of Counterpoint Research Tarun Pathak said the total laptop and PC market size in India is close to USD 8 billion annually, and approximately 65 per cent of the units are imported.

Lava International co-founder, Chairman and Managing Director Hari Om Rai said the decision to restrict import via valid permit is a great move by the government.

"It will add 10 billion dollars to Laptop manufacturing, billions of dollars of components and millions of jobs. It is also a very big milestone in building the much-needed scale of the supply chain of electronics in India," Rai added.

He said the government has ensured that there is no disruption in the supply chain so that the companies will have no issues with the "ease of doing business" and the consumers will continue to get the products at the same price.

According to the latest Canalys data, the Indian PC market (desktops, notebooks and tablets) suffered a major year-on-year decline of 35 per cent, with 3.9 million units shipped in the March 2023 quarter.

After a muted 2023, Canalys forecasts that the Indian PC market, including tablets, will rebound strongly with 11 per cent growth in 2024 and a further 13 per cent growth in 2025.

Deki Electronics MD and CII National Committee for Electronics Chairman Vinod Sharma said the government under IT Hardware PLI has provided incentives for the use of locally manufactured components, which will boost the domestic components ecosystem.

"A non-tariff measure in the form of a licence to check imports will boost local production. Imported IT hardware can also be spyware or malware. We have had similar cases in the past. The government is absolutely right in imposing restrictions to make sure that devices are procured from trusted and safe sources," Sharma said.

Electronic manufacturing services company Dixon Technologies Chairman Sunil Vachani said the way mobile manufacturing picked up in India, production of IT hardware is also expected to gain similar momentum.

He said IT hardware comes under Information Technology Agreement 1, which does not attract any import duty.

"The need for a licence to import laptops does not incur any cost of IT hardware. So, there will be no cost impact on the prices of these devices. On an immediate basis, we have requested the government to give some breather but in the medium and long run, it will have a very positive impact on India. First finished products will be manufactured, then the motherboard, which will be followed by other components," Vachani said.

He added that the government has opened a PLI scheme for both local and foreign players, which will make India globally competitive in IT hardware manufacturing.

"Mobile phone manufacturing has created employment for 7.5 lakh people. We feel similar potential lies for IT hardware," he said.

The Confederation of All India Traders (CAIT) said government restrictions on the import of IT devices will stop refurbished items from being imported.

"It will further stop imports of substandard products. However, it shouldn't affect the MOP (market-offered price) of branded goods as the Import duty is nil. It will also discourage Fly by Night Imports, which majorly evades GST. Foreign Companies who consider India as a vast market will be compelled to make investments in India for setting up their manufacturing plants in India," CAIT Secretary General Praveen Khandelwal said.

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