India is reducing its reliance on imported laptops and IT hardware by linking import permissions to local manufacturing capacity and increasing domestic production through the Production Linked Incentive scheme. However, India faces challenges due to WTO commitments and concerns from China and the US.
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India plans to reduce laptop imports by linking permissions to local manufacturing capacity and increasing domestic production through the PLI scheme.
India is highly dependent on imports of IT hardware, particularly laptops and electronics components.
In FY24, India imported $34.4 billion in electronic components, with China and Hong Kong accounting for more than half of this total. India is vulnerable to external market fluctuations as a result of its heavy dependence.
The Indian government is attempting to reduce its dependence on imported laptops and IT hardware by linking import permissions to the expansion of domestic manufacturing capacity.
The approach is similar to that used in the tyre manufacturing sector, where the government relaxed import restrictions in exchange for the establishment of local manufacturing facilities.
Once domestic production reaches a critical level, the government may introduce a credit system for imports to encourage manufacturers to increase local production.
India's strategy to boost domestic production includes the Production Linked Incentive (PLI) scheme, which provides subsidies to manufacturers who set up or expand facilities in India.
The government updated the PLI scheme for IT hardware in 2023, to increase local production. However, the domestic industry is still in its early stages, with Dell, HP, Lenovo, and Foxconn yet to reach significant production levels.
To avoid shortages, the government has extended the validity of import permits until December 2025.
India faces obstacles as a result of its commitments under the WTO's Information Technology Agreement, which requires zero duties on IT products such as laptops and computers. This prevents India from levying higher duties on these goods.
Countries including China, South Korea dominate the global IT market, and the United States (home to major laptop manufacturers such as Apple, Dell, and HP) have expressed concern about India's import monitoring system.
The global trade pressures complicate India's plans to limit laptop imports while meeting international commitments.
India aims to balance its international trade commitments with its domestic production objectives by aligning policies with WTO obligations while safeguarding its strategic interests, which requires a thorough approach to import monitoring and capacity building in India.
The government plans to strengthen domestic manufacturing in sensitive sectors such as IT hardware to reduce import dependence, however, it will ensure that its policies do not violate its international trade commitments, such as the WTO agreement's zero-duty requirement for IT products.
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PRACTICE QUESTION Q.Critically analyze the challenges India faces in reducing its dependence on imports and the role of the Production Linked Incentive (PLI) scheme in addressing these challenges. (150 words) |
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