Politics
In charts: Why India wants to push home-made computers
Summary
- Restrictions in imports of laptops and computers are aimed at reducing dependence on China. However, India has no competitive advantage in this field, and it will be a challenge to replicate the success seen with mobile phones.
Starting November, India is set to curb imports of laptops, tablets and personal computers, among other items, requiring companies to get a licence for the same. The move is aimed at boosting domestic manufacturing—on the lines of the recent successes in the domestic assembling of mobile phones and resulting exports. Major foreign players are expected to take a hit, possibly making their products costlier in the country. While industry associations and domestic companies have welcomed the decision, critics also see it as a protectionist step. Mint dissects the landscape of a booming sector where India depends heavily on imports.
Leaning on China
The rapid digitization has sparked an exponential surge in the demand for computers and laptops. Over the last decade, annual imports in the category have skyrocketed from $1.5 billion to $5.3 billion. In 2021-22, imports were even higher, at $7.4 billion. China stands out as the dominant source of imports of such products and their components, with a share of over 75%. Restricted imports are aimed at reducing this dependence.
Trade realities
Replicating the success of mobile phones (which, too, were driven by assembling rather than actual manufacturing) into the realm of computers will be a challenge. There aren't many countries that are net exporters in this field, trade data compiled by the Observatory of Economic Complexity shows. India, too, is a net importer, and its share in exports is tiny, unlike Asian peers such as Taiwan and Vietnam. China is a world leader in computer exports and also the largest net exporter.
Tough competition
India’s case for a protectionist move—one that could even stem competition in an important sector—probably comes from the fact that it currently has almost no competitive advantage in the international trade of computers. China and Vietnam both have much greater comparative advantage—and, India’s advantage is greater in mobile handsets than computers. With the new move, major foreign players such as Dell, Apple, Lenovo, and HP may have to make adjustments to their prices or profit margins in order to compete in the Indian market.
Aiming big
In the fiscal year 2022-23, India's electronic goods exports took the lead over traditional commodities, but computer hardware peripherals accounted for only a minor share of 2.2% in the overall electronic goods exports. Similarly, the latest data from the electronics and information technology ministry indicates that India's computer production makes up just 5% of the overall electronic sector. The government’s move is expected to change this trend.
