Indian government to curb imports of technology

India is a big market for international companies looking to sell technology like smartphones and laptops. According to Firstpost , the Indian government is looking to curb the import of this foreign technology. As of now, the rules for this are still in draft form and the government may still scale the plan back.

The curb on imports seems to be aimed at bringing pressure on foreign companies to increase the manufacturing of these products in India. If passed, the proposed regulations would create a “Buy India” mandate.

According to the rules, foreign companies will have to set up factories in India or expand their existing manufacturing capabilities.

Tech imports may get curbed

“If implemented, the rules could wreak havoc on the business plans of a wide range of US and other foreign firms, including hardware-makers Cisco Systems Inc. and Dell Inc; services companies such as International Business Machines Corp; and telecom-gear suppliers such as Nokia Siemens Networks BV and Telefon AB LM Ericsson,” reported the Wall Street Journal . 

The move could be a difficult one for companies like Cisco and IBM, as experts say the country has a nascent semiconductor market. The policy would also penalise companies for paying royalties on foreign products rather than developing them in India.

“India is the largest free-market democracy in the world. To mandate local manufacturing is antithetical to the very concept of a free marketplace,” said Ron Somers, President, US-India Business Council.

According to Indian officials, the regulations are required to slow down the imports the country has for electronics. The imports are on track to reach $300 billion by 2020, by when it would eclipse oil imports.

The proposal originally started as a move to keep Chinese telecom equipment makers in check. Back in 2009 and 2010, security concerns were raised when the government stopped BSNL from buying telecom gear from Huawei and ZTE citing worries that the equipment could be embedded with spy gear.

According to WSJ, the proposal has transformed in recent times to encapsulate tablets, laptops, printers, set-top boxes, Wi-Fi devices, phones and other technologies that make up the guts of business networks.

This could potentially be a good move for India’s unemployment rate as economists say the country needs to boost manufacturing to tackle it. According to the World Development Report by the World Bank, India’s youth unemployment was at 9.9 percent for males and 11.3 percent for females in 2010.

“Compare the number of Indians employed in the formal manufacturing sector with that in China. There is a multiple difference — 7 million in India and 100 million in China. India’s services sector is just not going to be able to employ that many Indians. It is going to be able to generate lots of revenues as it already is but to soak up India’s surplus labour force, it would be desirable to see labour-intensive, relatively low, value-added manufacturing,” said Edward Luce, the author of In Spite of the Gods: The Strange Rise of Modern India.