Centre looking to increase local sourcing of IT parts to $20 billion, to restrict Chinese imports

Centre looking to increase local sourcing of IT parts to $20 billion, to restrict Chinese imports

The Indian government is reportedly taking significant steps to promote the local sourcing of components for laptops and servers. The target is to achieve around $20 billion in local procurement over the next four years, a substantial increase compared to the current $1 billion procurement. This move is part of an effort to reduce reliance on imports, particularly from China, and bolster domestic manufacturing in the technology sector.

Under the “trusted sources” norm, the government is expected to impose restrictions on the import of hardware components from China and other non-trusted sources. The objective is to encourage and support local manufacturing in India, aligning with the “Make in India” initiative. This initiative aims to reduce dependence on imports, create jobs, and strengthen India’s self-reliance in critical industries, including technology hardware manufacturing.

The move to promote local component sourcing aligns with broader efforts to boost India’s manufacturing sector and reduce its trade deficit with China. It also reflects the Indian government’s commitment to building a self-reliant and resilient domestic manufacturing ecosystem.

The Indian government’s efforts to establish a strong ecosystem for device and server manufacturing within the country are becoming more evident with recent initiatives. These initiatives include the implementation of the Rs 17,000 crore production-linked incentive (PLI) scheme for IT hardware and the introduction of an “import management system” set to begin on November 1.

The PLI scheme, which provides financial incentives to manufacturers, aims to boost domestic production of IT hardware and create a competitive manufacturing environment in India. This scheme is similar to the successful model employed for smartphone manufacturing in the country.

The “import management system” is expected to play a role in regulating and managing imports, especially from non-trusted sources, to support the “Make in India” initiative and strengthen the local manufacturing ecosystem.

While the information comes from sources cited in the report, it underscores the Indian government’s commitment to enhancing domestic manufacturing capabilities in the IT hardware and technology sectors, mirroring the success achieved in smartphone manufacturing through similar policies and incentives. These measures aim to reduce reliance on imports, promote local manufacturing, create employment opportunities, and bolster India’s self-reliance in critical industries.

The Indian government’s efforts to reduce over-dependence on a single country, particularly China, for critical components are driven by concerns related to supply chain vulnerabilities and national security risks. The aim is to diversify sourcing options, which includes both increasing local production and sourcing from trusted nations. While Minister of State for IT & Electronics Rajeev Chandrasekhar did not comment specifically on China, he emphasized the importance of having a trusted supply chain that powers India’s internet, cloud services, and overall digital infrastructure.

The government’s objective is to have a significant portion of the supply chain originate from India or be “Made in India,” aligning with the broader “Make in India” initiative. Currently, only about 10 percent of the IT hardware supply chain is sourced from India, contributing approximately $1 billion to an industry estimated to be worth $8-10 billion in total.

This push for self-reliance and domestic manufacturing not only aims to reduce vulnerabilities but also to strengthen India’s economic and technological capabilities while creating job opportunities in the country. The government’s focus on trusted sources and local production reflects its commitment to building a resilient and secure technology ecosystem.

The Indian government envisions a significant expansion of India’s presence in the digital supply chain, with a target of increasing it from the current 8-10 percent to approximately 70 percent within the next four years. This ambitious goal reflects the government’s commitment to boosting domestic manufacturing, reducing reliance on imports, and strengthening India’s position in the global technology landscape.

The IT hardware industry is expected to undergo substantial growth, potentially tripling in size by 2027, reaching an estimated value of around $30 billion. In this growth trajectory, the share of components sourced from India is projected to reach approximately $20 billion. This indicates the government’s confidence in the potential of the IT hardware sector and its determination to create a robust and self-reliant ecosystem for technology manufacturing in the country.

Achieving these targets would not only have a significant economic impact but also enhance India’s technological capabilities and reduce vulnerabilities in the digital supply chain, aligning with the broader goals of the “Make in India” initiative.