‘Tis the season for festive sales in India, but instead of stocking shelves, laptop manufacturers big and small are scrambling to obtain import licenses from the Indian government, putting their business at the whimsical mercy of the state.
India announced a surprise curb of laptop, tablet, and personal computer (PC) imports, mandating entities obtain a “valid licence for restricted imports,” in a government notification yesterday (Aug. 3). Soon after, US tech giants Apple and HP, as well as South Korean electronics behemoth Samsung, had to freeze new imports and figure out next steps with New Delhi, Bloomberg reported today (Aug. 4).
The threat of import squeezes always lurks in India as prime minister Narendra Modi’s government looks to boost domestic manufacturing, but this latest drastic step has left tech companies in a bind. “This restriction may lead to some short-term supply disruptions, especially for brands like Apple, HP, and Lenovo. Moreover, with the festive season approaching, a significant period for sales, the industry may face challenges in meeting demand,” Tarun Pathak, research director at Counterpoint analysis, told Quartz yesterday.
The abrupt halt is an unwanted throwback to how the post-colonial Indian economy functioned. It’s reminiscent of the License Raj between the 1950s and 1990s, when no business decision could be taken without government approval. The regime, established through the enactment of the Industries (Development and Regulation) Act, 1951 (IDRA), made obtaining a licence a requirement to establish any new industrial undertaking or substantially expand existing ones. The system was criticised for its rigidity and socialist bend.
Quotable: The politics of the License Raj
“Licencing was, above all, a political project that was instrumental in establishing the sovereignty and jurisdiction of the post-colonial state over the economy. [...] At the time of India’s independence, the state form was contested. There were over 500 princely states, some regions wanted to establish their own independent states, and the cohesion of the people of India as a ‘nation’ was seriously under question in the backdrop of Partition. The promise of economic development, which included the development of large-scale industries, made the nation-state necessary and desirable, and legitimised its sovereignty and authority over the Indian economy.” —Rashmi Venkatesan, assistant professor at the National Law School of India University, Bangalore, in a May 2023 essay
India after the License Raj
After the Licence Raj came the New Economic Policy of 1991, which hinged on “LPG”: Liberalization, Privatization, and Globalization. Reforms were geared towards:
📛 Reducing state control over economic activity and reducing restrictions such as tariffs;
🤝 Transferring ownership of government businesses to private companies;
🌎 Increasing in trade with other countries and integration with the global economy.
Consequently, there was less political interference and more competition.
But in recent years, an increase in crony capitalism has raised concerns about the ties between government and business. A Cornell University professor warned that India was regressing to the permit-Licence Raj in 2020. The next year, a Nobel laureate Paul Krugman said India should not go back to that era, and instead develop “deliberate policy to foster industries.” In 2022, an opposition leader said the government’s “efforts to keep all powers of investments in the country with the prime minister” is “not good for the country.”
These concerns seem to have fallen on deaf ears, since little has changed. The laptop and PC import restriction came two days after the company owned by India’s richest man and Modi ally Mukesh Ambani launched its Rs 16,499 ($200) laptop JioBook. The timing, to some observers, seem more than just a happy coincidence.
Company of interest: Samsung
Foreign companies have long harbored dreams of tapping into India’s demographic dividend. Samsung was among the first movers. The South Korean company started producing TVs in Noida, about 50 kilometeres southwest of New Delhi, back in 1995. In 2003, it began making refrigerators at the plant. In 2007, mobile phones. In 2017, it pumped in $620 million into its Noida facility, building what was considered to be the world’s biggest mobile phones factory at the time.
Samsung’s momentum on the talent- and customer-side also keeps growing: Last November, the company said it was looking to hire 1,000 engineers across its research institutes across India to work on advanced tech. In April this year, it unveiled plans to establish “15 premium experience stores” in major metros across India by the end of 2023.
But when it comes to laptops, even the lofty player is a laggard. It stopped selling laptops in India in 2014 and missed out on the entire pandemic surge in personal devices here, only re-entering the market in March 2022. The company started off (again) with just imports but said it was open to manufacturing in India, too. Updates on how far along it is in the Make-in-India journey are elusive.
India’s IT hardware market, by the digits
$19.7 billion: India’s electronics imports, which include laptops, tablets and personal computers, in the April to June period, up 6.25% year-on-year
$8 billion: India’s laptop and personal computer market size, according to Counterpoint’s Pathak
30 to 35%: Share of IT hardware products currently made in India, compared to import bans and financial incentives leading to “almost 100% local manufacturing for smartphones and TVs,” as per Pathak
64%: Share of imported finished electronic goods (including components) in total imports of electronic goods in 2021–22, down from 69% in 2019–2020, as local production picked up
35%: Share of imported electronic components with respect to total imports of electronic goods in 2021-2022, up from 30% in 2019-20 to 35% in 2021-22, “indicating a favorable shift in domestic electronics manufacturing,” according to the Indian government
$2.1 billion: The financial incentive plan for makers of laptops, tablets and other hardware, in place since 2021, was increased 131% in May as the government continued to lure companies away from China
7%: Increase in the shares of local contract manufacturers Dixon Technologies
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