Well, not entirely so to speak. The authorities are okay with global giants taking some more time to set up local manufacturing
In what appears to be a quid pro quo between the government and IT hardware makers, the federal authorities appear to have eased up on their import licensing plans provided foreign players set up manufacturing units locally within a stipulated time frame. As a first step, they must submit a detailed roadmap of their make-in-India approach for each product category.
Readers would recall that the government had placed import restrictions on a bunch of hardware products such as laptops, servers, tablets etc. as part of its efforts to lure capital investments in the industry. In fact, early reports indicated that the overseas companies were flummoxed by the government’s policy turnaround and sought time to comply.
Having witnessed more than a couple of backtracking moves over the import licensing norms, the latest shift in the government’s stance is not surprising, given that its sole objective for making cheap imports tougher was to lure capital investments in hardware. There was also a geopolitical consideration as most hardware imports were from China!
Global companies seek time for manufacturing push
According to a report published by ET, the foreign companies have asked for twelve months for setting up local manufacturing units in the country. Given that general elections are scheduled in less than eight months time, the administration has asked for detailed plans much sooner so that they could approve an additional 12 months or even relax licensing norms in such cases.
At first glance, the move makes a lot of sense as only capital investments can drive an economy’s ability to grow jobs and possibly also drive up exports. If the Dells and HPs come calling with their own plants and machinery and set up units that are beyond local entities that do contract manufacturing, it could be a big win for the Narendra Modi regime.
The ET story quotes unnamed officials to suggest that the government is directly working with some of these companies to set up timelines and understand specific requirements for setting up such production units. There’s no way these companies can fabricate a production unit in anything less than a year, so drawing political mileage during the polls seems a tough ask.
Looks like the government’s plan is working
All that the administration would require is commitments in terms of capital and schedules from a few big companies over the next month or so. Once these emerge, the DGFT may even go back on its import licensing notification (first issued on August 3 and then postponing the requirement by three months).
While the extension was supposed to be the result of a pushback by the industry who sought more time to fulfill existing import orders in transit, the fact remains that the government had actually made the move to indicate that it wasn’t kosher with cheaper imports (dumping) from neighboring countries where the very same brands were churning out large volumes.
Officials reiterate that it’s not License Raj-2
While there was some confusion around the initial notification that added an “immediate effect” clause to the import licensing needs, mandarins have since sought to mollify both industry as well as policy think tanks that India wasn’t reverting to its dreaded “license Raj” that prevailed before 1991 when the country opened up its economy.
Officials noted that the licensing requirements weren’t draconian and only required a couple of forms to be filled with almost instant approvals. However, the move didn’t go well with Nasscom which asked the government to review it on grounds that it will take a heavy toll on the $245 billion Indian IT industry, one which consumes maximum electronic products.
The road ahead needs smoothening
While all of this is baking out, sources in the ministry of electronics and information technology said companies have been asked to submit their localization plans at the earliest with a clear roadmap to start production within twenty-four months. In fact, officials want some of the brands to use the existing manufacturing ecosystems to speed up their own efforts.
It is pertinent to note that India imported IT products worth $8.8 billion during FY23 with China holding the largest share of $5.1 billion followed by $1.3 billion from Singapore.