India’s new policy directive restricting the import of laptops, tablets, personal computers and the need for companies to get an import licence, which is to come into immediate effect, is going to hurt the major computer manufacturers like Apple, HP, Lenovo, Dell and others because India imports two-thirds of its computer needs. This is seen as an attempt by the government to encourage manufacturing of computer hardware in India, and force these international companies to start manufacturing units in India. And the Indian government has an attractive productivity linked scheme for those setting up manufacturing in India in sectors like computer hardware and semiconductors.

It is also seen as a strategy to restrict imports from China because most of these companies bringing laptops, tablets and PCs into India ship them from their manufacturing units in China. India has raised the issue of imports from “trusted partners”, making it out that India would not trust imports from China, more so since the border stand-off between the two countries in May-June 2020.

In many ways, the Indian government’s decision is going back to the old-fashioned tariff walls, imposing import taxes to discourage buying foreign products. But right now the policy comes wrapped in new terminology and new solutions as well. The solution is for the computer and laptop manufacturers to set up manufacturing facilities in India, and to create the much needed manufacturing base in the country.

This is indeed the policy that the United States had followed in the case of Japanese cars. The US had asked the Japanese automakers to set up manufacturing units in the US. Unlike in the case of Japanese carmakers forced to make cars in the US, the Indian government is offering attractive tax incentives to the computer hardware manufacturers.

This is a policy that would find support among the governments of the US and the European Union (EU) because they are keen to break the dominance enjoyed by the Chinese in being at the head of the global supply chain. After the COVID-19 pandemic disruption, the Western countries are wary of depending on China as the major manufacturing hub. India has been keen to grab the opportunity to be the alternative to China and many of the Western governments have been supportive. But the private sector players who have gotten used to the cheap infrastructure and cheap labour offered by China were not too keen to move away.

But with India emerging as a major market, the scene has changed. What has also been in favour of India is the fact that China’s post-COVID-19 recovery has not been steady enough. And it has made it easy for the global players to look for alternatives to China. Though the Philippines and Vietnam look to be friendly alternatives to China, what the small south-east Asian countries cannot offer is India’s huge market, and its rising domestic consumption.

The shift from China to India is not going to happen swiftly. It will happen over a longer period, and there will be fluctuations in the Indian and Chinese market situations. The West is keen to shut off Chinese economic activity to the extent it can, but it too does not want it to happen suddenly.

The West however is keen to taper the Chinese market dominance but it also wants to keep China as a key global player so that it can pressure China on many political issues. Meanwhile, India would want to take advantage of the situation, but India too wants to leverage its position as a major market. It does not want to toe the West’s line.