August 6, 2023
In a surprising move, the Indian government has announced a partial reversal of its decision to impose a licensing requirement for the import of laptops, tablets, and personal computers. This change, while aiming to defer the imposition of the requirement by three months, has raised concerns about its potential impact on the tech industry and foreign investments in the country. The move comes as India’s strained relations with China continue to influence economic and trade decisions.
Cost hike in Laptops and Macbooks
The government’s decision to defer the import licensing requirement has left industry experts and stakeholders puzzled. The sudden policy change could potentially lead to costlier laptops and MacBooks for Indian consumers, as the measure might eventually lead to higher import tariffs. While the Indian government has not explicitly pointed to China as the target of these changes, it’s worth noting that more than half of India’s annual imports of personal computers and tablets are Chinese-made.
Tensions between India and China escalated in mid-2020 following a deadly clash between troops along the Himalayan frontier, resulting in the loss of lives on both sides. This incident had a profound impact on the bilateral relationship, leading to various economic consequences, including the review of foreign investments and trade policies.
Chinese electric car manufacturer BYD recently notified its Indian joint-venture partner about its decision to postpone a $1-billion investment plan aimed at building electric cars in India. The move comes after the investment proposal faced scrutiny from Indian authorities. Similarly, Great Wall Motor, another prominent Chinese automaker, abandoned its $1-billion investment plan in India last year due to regulatory challenges.
The tech sector has not been immune to the tensions either. Xiaomi, a major smartphone maker, has had $670 million of its bank assets frozen by the federal financial crime agency since last year. The agency alleges that the company engaged in illegal remittances to foreign entities under the guise of royalties. Xiaomi, however, has denied any wrongdoing.
Banning Apps for National Security
The Indian government has also taken measures to address national security concerns by banning around 300 Chinese mobile apps, citing data privacy issues. Notable among the banned apps is a popular battle-royale game from Krafton Inc., a South Korean company backed by China’s Tencent.
These developments come against the backdrop of India’s introduction of new investment vetting rules in 2020. The regulations impose an additional layer of scrutiny and security clearances on investments from neighboring countries, particularly China. This move aims to safeguard against takeovers and investments by Chinese firms, but it has also caused billions of dollars in proposed investments to become entangled in the approval process over the past three years.
As the diplomatic and economic landscape between India and China continues to evolve, the tech industry and foreign investors are closely watching the impact of these policy changes. The outcome of these decisions will not only shape the trajectory of bilateral relations but will also influence the future of technological innovation and investments in India’s fast-growing market.
