India's trade policies tend to confuse potential tech investors

02nd February 2024
India's trade policies tend to confuse potential tech investors
Assembling mobile phones in a plant of India-based consumer electronics contract manufacturer Dixon. Photo: Dixon Technologies

By Anand Parthasarathy

With India’s interim budget scheduled to be presented on February 1,  the lobbying and the wish lists  are in full swing,  not least for the technology driven industries.

The India Cellular and Electronics Association (ICEA) suggests that import duty cuts on mobile phone components can increase domestic production of handsets, boost exports, and help indigenous manufacturing.

The Global Trade Research Initiative (GTRI) comes to the opposite conclusion saying the current tariffs which are between 7.5% and 10%  should be continued. As any reduction will adversely affect local manufacturing.

The India Electronics and Semiconductor Association (IESA) has exhorted government not to impose customs duties on the electronic transmission of design data between India and the rest of the world.

Like the Roman God Janus,  Agni the puranic  fire God is often depicted with  two faces. And   at  least some of this confusion  can fairly be attributed to   the Indian government’s seemingly  dual-faced approach to trade policies .

They simultaneously seem to say swagatam, welcome,   to foreign investment in Indian manufacturing  by offering carrots like Production Linked Incentives (PLI),  while  raising a stick or danda with protectionist import tariffs and  heavy handed justice for alleged defaulters.


In August last year, the government, out of the blue, announced import restrictions and a licensing requirement  for laptops,  tablets and certain class of computers. Howls of protest that this was a throwback to the notorious  ‘Permit-Licence Raj” prevalent in the 1960s and 70s,  saw some obfuscation about what government really meant, successive  postponements and rephrasing of the announcement   which was watered down from  a licensing requirement to an “online authorisation” till  September 2024.  After that date, what?


WTO obligations

There were vague suggestions that  national security considerations  were behind the move to control who imported what computer hardware  and seek more data from importers.  Many exporting nations are uncomfortable with this and point to India’s commitments under  World Trade Organization (WTO) rules which  require signatories to do away with most such trade barriers.  But by now India has become rather adept at signing up on such global agreements, then  looking assiduously for  grounds to seek exemptions.

This often happens because  different ministries sometimes work at cross purposes.  The Finance Ministry’s  zeal in  seeking to tax exchange  of data between   global  tech players like Intel, Qualcomm, TI,NXP and others and their India-based  design centres,  defeats the  official encouragement of such  Global Capability Centres (GCCs)  which  number about 1600 in India.

Dealing with white collar crime

White collar crimes are a global phenomenon and  need to be dealt with. But turning   a case into  a  international cause celebre is counter productive and only send an appalling message. 

An ongoing  case of alleged money laundering by  a Chinese  phone maker, Vivo has seen the arrest  among others, of the Managing Director   of a well known Indian mobile phone maker, Lava whose commercial    connection with the Chinese company, appears to be  tenuous.

The Information Technology Minister of State, Rajeev Chandrasekhar  has been quoted  in Business Standard as being ‘very concerned’  adding “As a brand we hold Lava to be a very important participant… I do not know all the facts… I hope... the right thing is done by Lava.”

Whatever be the true facts of the case, Indian and foreign nationals in the tech industry spending weeks and months  in jail without bail for alleged financial crimes makes for  bad optics. 

It underlines how both policy and trade environment need to be welcoming even if law abiding; consistent with international practice and in adherence to all global policies, a country signs up for.

‘Carrot and stick’ is a neat phrase. It’s not a good model in the real world of global business.

This has appeared in NewIndiaAbroad