Inverted duty, infra issues hurting IT hardware sector: Experts

Facing challenges like inverted duty structure and infrastructure bottlenecks, IT hardware industry has urged the new government to take corrective measures to bring back growth in the sector that has been witnessing flat growth in the last few years.

Faced with a double whammy of increasing input costs and growing preference for smartphones and tablets, the sector has seen big players like HCL Infosystems, Wipro and Samtel exiting the segment.

The existing players are now hopeful of positive changes coming in as the new government headed by Prime Minister Narendra Modi settles down to tackle issues affecting economic growth of the country.

"Inverted duty structure makes domestically manufactured goods uncompetitive. The government should look at exemption of SAD (special additional duty) on all components used by the IT manufacturer," Intel South Asia Director (Marketing and Market Development) Sandeep Aurora told PTI.

Inverted duty structure is one where duty on finished goods are reduced and lower duties are imposed on raw materials like components.

Besides, there is an urgent need to upgrade facilities for encouraging component manufacturing in the country. There is a need to also work on the ease of doing business in India, he added.

Issues like high inflation and soaring prices due to rupee fluctuation is also a constant worry for the industry.

The players believe the sector still has a lot of potential as the PC penetration in India is below 10 per cent compared to 40-50 per cent in countries like China, Russia and Brazil.

However, manufacturing of electronic hardware in the country has suffered on account of high cost of power and finance, high transactional costs and poor base of supply chain, thereby increasing dependence on imports.

Acer India Chief Marketing Officer S Rajendran said the Compulsory Registration Order (CRO), which makes 15 electronic products including video games, laptops and microwave ovens subject to safety standards, though a good initiative is leading to delays in introducing products in the market.

"Already the industry follows so many guidelines and then there is sluggishness in sales. With CRO our products get delayed and by the time they come through the technology has already advanced. This is a double whammy for us as the cost of operations goes up significantly," he added.

Rajendran suggested that the government can pass the products with a self-declaration from the manufacturer and can randomly pick up samples from the retail market to check them.

IT hardware industry body MAIT's Executive Director Anwar Shirpurwala said the lack of infrastructure like roads, ports, high cost of electricity, is affecting productivity as well as competitiveness.