Indian Government to Severely Restrict IT Hardware Imports from China and Promote Local Sourcing

The Indian government is set to implement stringent measures to “severely restrict” the import of IT hardware components worth billions of dollars from China. These measures are part of the government’s ‘trust sources’ norms, aimed at reducing dependence on foreign imports and encouraging domestic manufacturing. According to sources cited in a report by Times of India, the government’s objective is to boost local sourcing of components for laptops and servers to approximately $20 billion within the next four years, a significant increase from the current $1 billion.

Shifting Focus to Trusted Sourcing and ‘Make in India’

A government source emphasized the importance of shifting the focus towards trusted sourcing and locations. The government aims to incentivize companies to establish manufacturing operations in India rather than relying solely on imports. The source stated, “We will restrict the movement of parts and components from China, as the focus is on trusted sourcing and trusted locations. Also, we need to find out ways to encourage companies to ‘Make in India’, rather than continue with just imports.”

Promoting Domestic Manufacturing with PLI Scheme

The Indian government’s commitment to bolster the IT hardware manufacturing ecosystem is evident through the implementation of the Rs 17,000 crore production-linked incentive (PLI) scheme. This initiative, coupled with the introduction of an “import management system” starting from November 1, reflects the government’s determination to create a robust manufacturing environment for devices and servers within India. The model is inspired by the successful approach taken in smartphone manufacturing.

Addressing Supply Chain Vulnerabilities

The heavy reliance on a single country, particularly China, for critical IT hardware components has raised concerns about supply chain vulnerabilities and national security risks. Presently, India accounts for approximately 10 percent of the IT hardware supply chain, contributing around $1 billion to an industry estimated to be worth $8-10 billion.

Recent Import Restrictions

Last month, in a bid to promote domestic manufacturing, the Indian government imposed import restrictions on several IT hardware products. This included laptops, tablets, all-in-one personal computers, ultra-small form factor computers, and servers, with immediate effect. The Directorate General of Foreign Trade (DGFT) issued a notification outlining these restrictions. Import licensing exemptions were provided for specific purposes such as RandD, testing, benchmarking, evaluation, repair and return, and product development.

The DGFT, an arm of the commerce and industry ministry responsible for overseeing imports and exports, classified the import of laptops, tablets, all-in-one personal computers, ultra-small form factor computers, and servers as “Restricted” with immediate effect.

These measures signify the Indian government’s dedication to reducing reliance on foreign imports and fostering a self-reliant ecosystem for IT hardware manufacturing, aligning with the broader ‘Make in India’ initiative.

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