Written by Shani A R (NUALS).
Introduction
In the 21st century, we are immersed in a continuous wave of technological advancements and has become a vital part of our lives. It’s difficult to conceive of a world without technological developments. Electronic equipment such as laptops and tablets is a significant part of this technological evolution. The entire world has come up with innovative ideas and technologies to simplify our daily tasks. Instead of waiting for a letter to be delivered, today, we have a mobile phone at our fingertips, allowing us to convey messages to others without delay.
India has indeed become a platform for foreign countries to easily sell their products due to its relatively lax import regulations. It’s a growing trend that many people in India prefer to buy foreign products over domestically manufactured ones due to which the import of electronic equipment has increased immensely in recent years. During the April-June quarter of this year, alone, the imports of electronic goods increased from $4.73 billion a year ago to $6.96 billion.
To reduce the import of electronic goods, the Directorate General of Foreign Trade (DGFT) issued a notice in August 2023 imposing restrictions on electronic equipment such as laptops and tablets falling under HSN 8741 category. These restricted items now require a valid license to be sold in Indian markets.
Motivations for import restrictions
The DGFT’s issuance of the notice is motivated by several key factors.
It aims to reduce imports from China, which account for a significant portion of India’s electronic equipment imports. Specifically, a staggering 59% of these imports are sourced from China, with the remaining 41% originating from various other countries, including the USA and South Korea.[1]
Apart from this, the import restrictions are expected to have a positive impact on domestic production. They are designed not only to encourage self-sufficiency but also to protect against the potential risks posed by electronic hardware that might have security vulnerabilities capable of compromising sensitive personal and enterprise data.
India is currently grappling with a high rate of unemployment. The implementation of these import restrictions is seen as a means to generate job opportunities for a substantial number of people. In doing so, it is anticipated that the country will be able to conserve millions of dollars in foreign exchange, bolstering its economic position.
Furthermore, this step is in line with the recent success in manufacturing mobile phones in India, where the government has been actively providing incentives for mobile manufacturing companies.[2] The introduction of the Production Linked Scheme for large-scale manufacturing has borne fruit, propelling India to become the second-largest mobile phone manufacturer globally, just after China
Effects on global market and customers
The restriction on the import of electronic equipment will indeed affect the global market as a whole. It will create a disturbance in the supply chain and undoubtedly impact the availability of various laptops and other gadgets in the market. There is a high chance of a rise in the prices of these products due to import restrictions because it will take some time for exporters to apply for licenses and gain approval for export. Meanwhile, the market may become flooded with duplicate items intended to deceive consumers. While these restrictions may help domestic manufacturing units produce electronic equipment that aligns with customer expectations and can be launched in the market at an affordable price.
[1] https://economictimes.indiatimes.com/podcast
[2] https://www.cnbctv18.com/technology/pli-scheme-for-mobile-phones-has-been-the-most-successful-govt15478671.htm#:~:text=As%20of%20September%202022%2C%20the,exports%20of%20Rs%2080%2C769%20crore.&text=The%20production%20of%20mobile%20phones,31%20crore%20in%202021%2D22.