India gives preferential access to home-made laptops and tablets

The government has issued a notification that calls for giving preference to domestically manufactured laptops and tablet PCs while its departments procure the equipment. This is in addition to the notifications by the Centre that mandate government organisations to give preference to domestically manufactured desktop PCs and dot matrix printers during procurement.

The fresh notification prescribes 50 per cent preference (in value terms) to domestically manufactured laptop PCs and tablet PCs in government procurement. The notification came into effect immediately. After March 2014, when the first year of the notification ends, the domestic value addition would automatically increase by five per cent.

Most of the tablets and laptops are imported. According to estimates by Manufacturers’ Association for Information Technology, MNC brands control about 59 per cent of the PC market in India while domestic brands control 13 per cent. The rest is contributed by the grey market.

The National Policy on Electronics, approved last year, emphasises on promoting the domestic electronics system design and manufacturing industry in the country. The department of electronics and information technology had issued a notification in December 2012 for providing preference to home-made desktop PCs and printers in government procurement.

US lobbyists and industry had been opposing the “preferential access” given to domestic products, as it goes against the concept of free marketplace. But the Indian government is standing its ground and maintained that the “policy does not support protectionism.”

“We have assured the foreign players that this is only for government procurement... but the companies fear that the Indian authority might extend it to private sector imports as well citing security reasons, especially in procuring electronics for telecom,” said a senior official from the department of DeitY.

Recently, Ron Somers, president of the US-India Business Council, and prominent figures in the US-India relations had been quoted by the Wall Street Journal saying that "to mandate local manufacturing is antithetical to the very concept of a free marketplace". 

Reacting to Somers’ comment, Minister of State for Communications and Information Technology Milind Deora had said, "The policy does not support protectionism. Governmental agencies are exempted from the provisions of General Agreement on Trade and Tariffs (GATT). Besides, India is not a signatory to Government Procurement Agreement (GPA) of the WTO and, therefore, is not constrained by the stipulations of the GPA.”

Some of the major US electronics companies operating in India without manufacturing are Intel, IBM, Texas Instruments and HP. Companies such as Cisco and Dell are engaged in Design & Assembly only, according to industry sources. According to sources, most of the global IT hardware companies who do not have a manufacturing presence in India are against the policy.

As per various estimates, the import of electronics goods by India is expected to reach $300 billion by 2020, even more than what the country will be spending towards importing petroleum products. The largest imports are of telecom equipment and phones (in excess of $7 billion) followed by IT/computer equipment and consumer electronics.

“The opposition to US and Western/Japanese companies is largely against the PMA policy and their focus is on telecom equipment, which is a very large import sector for India and they want to continue their hold over the Indian market without committing to manufacturing here,” Rajoo Goel, Secretary General for Electronics Industries Association of India ( ELCINA) had said.

According to the Manufacturers’ Association for Information Technology (MAIT), 10.8 million units of laptops and desktop computers were sold in the country in 2011-12 -- 8.5% less than what the industry body had projected earlier. Laptop PCs accounted for about 35 per cent of the total units sold in 2011-2012.

The tablet market, according to MAIT, is expected to touch 1.6 million units in the current financial year and grow to touch 7.3 million units by 2015-16.