India’s unexpected announcement of import restrictions on personal computers and laptops in August sent shockwaves through major suppliers like Apple, Samsung, and Dell. The move was intended to support Prime Minister Narendra Modi’s “Make in India” program and position the country as a high-tech manufacturing hub. However, this protectionist measure seems contradictory to India’s desire to enhance its global reputation, particularly as it prepares to host the Group of 20 leaders. As geopolitical alliances shift and investors seek alternatives to China, these import curbs add to the already complex contradictions.
Pravin Krishna, a professor in international economics at Johns Hopkins University, acknowledges the paradoxical nature of India’s government policies. While India actively seeks international investment and the establishment of manufacturing facilities, protectionist measures have gradually increased, leaving investors puzzled. The recently imposed import restrictions, effective from November, target laptops, tablets, “all-in-one” personal computers, and servers. Single purchases from online vendors are exempted. These regulations aim to ensure the use of “trusted and verified” systems while reducing dependence on imports. However, analysts predict that the restrictions will increase end-product costs for foreign vendors and redirect consumer spending towards Indian firms or established foreign vendors with manufacturing bases in India.
The top three mobile brands in India, Xiaomi, Vivo, and Samsung, have already established manufacturing bases in the country. This suggests that new entrants will need to either partner with experienced domestic players or invest in greenfield projects, further limiting foreign vendors’ opportunities. In a bid to attract foreign investors, Modi’s government has increased the production-linked incentive scheme’s budget to $2.04 billion. However, economists like Krishna believe that local laptop production could have been encouraged through these incentives without imposing additional import restrictions. Apple’s recent decision to shift some manufacturing to India for its iPhones reflects the potential benefits of production-linked incentives. Taiwan’s Foxconn, the main assembler for Apple, announced a $600 million investment in India in August, signaling the country’s attractiveness as a manufacturing destination.
India’s growing relevance in the global market is magnified by geopolitical tensions, the rapid adoption of e-commerce, the COVID-19 pandemic, and the Russia-Ukraine conflict. As a result, there has been a reconsideration of sourcing strategies, supply chain diversification, and localized manufacturing. While Southeast Asian economies like Vietnam have been the primary beneficiaries of supply chain diversification so far, India’s potential market scale is comparable to that of China. Sumedha Dasgupta, a senior analyst with the Economist Intelligence Unit, acknowledges India’s improving position in capitalizing on these trends. However, the government’s imposition of import restrictions seems contradictory to its aspirations to become a leading global market.
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