Editorial: Return of License Raj
A major challenge now will be to scale up local manufacturing so that the industry is able to meet the ever-rising domestic demand
The licence-permit Raj of the pre-liberalisation era was responsible for stifling the economy. Over three decades later, it appears to be making a comeback, though it is anachronistic in this time and age to embrace licence Raj. The Centre’s sudden decision to impose restrictions on the import of laptops, tablets and other devices is reminiscent of the repressive regime of the past. The NDA government has cited security reasons and the need to promote domestic manufacturing of electronic goods and to reduce dependence on China to justify the move. In 2022-23, imports of personal computers, laptops and tablets stood at $5.3 billion, with China accounting for roughly 70-80% of the share of the imports. Companies would now be required to obtain an import licence under the new laws. This could cause a delay in the simultaneous release of new PC and laptop models in Indian marketplaces. The Centre’s move is ostensibly meant to boost the recently renewed production-linked incentive (PLI) scheme for IT hardware and is expected to push companies to manufacture locally in India, as the country looks to strengthen its domestic production prowess in the electronics sector. Since no warning time was given to equipment manufacturers, this decision will lead to unnecessary disruption in the immediate term, create supply shortages and drive up prices of equipment. While it may force companies to manufacture in the country considering the huge market that India offers, there may be cost disadvantages.
A major challenge now will be to scale up local manufacturing so that the industry is able to meet the ever-rising domestic demand, with laptops and tablets being heavily used in the education, business and entertainment sectors. Even as India has made significant progress in local manufacturing of smartphones and TV sets, the IT hardware segment has failed to keep pace with the global trends. Earlier this year, the union Cabinet approved a production-linked incentive scheme for IT hardware with a budgetary outlay of Rs 17,000 crore. In a bid to attract big-ticket investments, India has extended the deadline for companies to apply for this scheme. The government would have to go all out to spur leading international players to establish manufacturing facilities in India to create world-class IT devices. Instead of a knee-jerk reaction like imposition of ban on imports, the government must adopt policies that help create a computer manufacturing ecosystem in the country. Imposing import restrictions without consulting industry stakeholders is an ill-conceived move in a country that has a vibrant IT services sector. Such moves represent a throwback to the socialist past and could open the door for imposition of similar licensing requirements in other sectors. The government controls on economic activities will only diminish the vibrancy of the economy. The country has come a long way after dismantling the licence permit raj.
