What did the government do?
The government restricted the import of certain electronic products, including laptops, tablets, all-in-one personal computers, ultra-small form factor computers, and servers. These products fall under the Harmonized System of Nomenclature (HSN) 8471 category, which includes automated data processing machines and units. The import of these items will be restricted from November 1, and a valid license will be required to import them for sale to consumers.
What is the purpose of the move?
The primary goal of restricting the import of certain electronic goods is to reduce the country's reliance on imports, ensure domestic access to trusted hardware and systems, and boost domestic manufacturing. This move aligns with the government's efforts to promote the production of electronic goods within India and reduce foreign exchange outflows due to imports.Since a substantial import is from China, it help[s to reduce them.
Is domestic production of electronic goods growing?
Yes, domestic production of electronic goods has been increasing. According to industry estimates, the production of electronic goods in India grew from $49 billion in 2016-17 to $87.1 billion in 2021-22, demonstrating a Compound Annual Growth Rate (CAGR) of 15%. This growth reflects the government's initiatives to encourage domestic manufacturing. However, concerns were raised about the decline in manufacturing capacity over the years, particularly in the IT hardware sector.
What products are affected by the import restrictions?
The government restricted the import of various electronic products, including laptops, tablets, all-in-one personal computers, ultra-small form factor computers, and servers. These restrictions were initially meant to be enforced immediately, but a revised order deferred enforcement until November 1.
What does the order specify about import licensing?
Starting from November 1, the import of products categorized under the Harmonized System of Nomenclature (HSN) 8471, which includes automated data processing machines and units, will require a valid license for import and sale to consumers. Exemptions to this licensing requirement include:
Purchasing a single unit of the mentioned products on an e-commerce website, brought into the country through post or courier.
Import of products for repair and return purposes.
Import of up to 20 items in a consignment for research and development, testing, benchmarking, evaluation, repair, re-export, or product development.
How are companies reacting to these changes?
Global companies operating in India have expressed concerns and sought deferrals of the implementation by 9-12 months. They aim to increase domestic production and understand the licensing process before the restrictions come into effect. Some major vendors already have local assembly processes, and they intend to expedite these processes to build a stronger ecosystem around domestic production.
What could be the impact on prices and availability?
During the festive sales season, which falls before the enforcement date, vendors are not expected to increase prices. However, customers may anticipate future price increases and make advance purchases. After November, some price increases are expected. The impact on availability may depend on how well vendors manage their inventory and adapt to the new licensing requirements.
