India's IT Hardware imports surged as much as 50 percent in August from July, ahead of the new licensing rules coming into effect from November 1. The Director General of Foreign Trade (DGFT) put the import of IT hardware, including laptops, PCs and servers, under the restricted category last month, calling for a licence. As a result, companies are fearing a supply crunch.
The notification, passed on August 3, was amended a day later, deferring implementation to November 1, giving the industry three months to recalibrate. The order, however, has led to fears of supply disruptions and price increases once the restrictions kick in, according to a media report by The Economic Times.
Imports in August exceeded 1.2 million units, up from 800,000 in July, due to an increase in orders from enterprise customers as well as original equipment makers (OEMs), who want to ensure adequate stocks during the festive season and for corporate requirements, an expert said. An industry grouping pegged the import spike at 20-30 percent.
Companies also fear getting devices made by Chinese companies as their use may not be allowed by the government in future, said an executive at a global IT Hardware company. In the telecom sector, China's Huawei and ZTE are effectively barred from participating in India's 5G deployment. Lenovo for instance hasn't been participating in government tenders in the past two years.
"Lots of global companies who have their shared services here -- Amazon, Walmart, Meta, Google --have reached out to us, and preponed their buying plans," said Tejas Bagadia, director at Team Computers, a system integrator that caters to more than 2,500 enterprise customers. "They had decided to procure more during the October-November period but now they have started procuring in advance, anticipating a shortage after the notification comes into effect."
Bagadia said he was getting inquiries from global firms as recently as last week about the situation on the ground, fearing a disruption with new hires not having machines.
"There has been around a 27-28 percent spike in customers who had actually planned to procure stocks in November but have moved up to August," Bagadia said. "In fact, a lot of new customers have also reached out to us."
When a new model is introduced, OEMs need to get certification from the Bureau of Indian Standards (BIS), executives said. With licences coming into play from November, there may be a delay of a few weeks before stocks can be sent to distributors.
"Therein lies the concern. If there are 100 people joining, and machines are not in stock, business continuity can get adversely impacted," Bagadia said. During the pandemic, companies had struggled to secure adequate stocks for employees, so now they are being extra careful, he said.
An executive at a top global IT hardware brand as well as an industry association said that many enterprises have started keeping year-round stocks with systems integrator companies such as Team Computers, so they can procure them as and when needed.
"There are certain models from each OEM that are procured the most by enterprises," one of the executives said. "Ever since the second notification came, extending the deadline, these OEMs have ensured, without any projections, that at least these models are adequately available."
Global brands have applied for the revised production-linked incentive (PLI) scheme for IT hardware aimed at making India a manufacturing hub for laptops, PCs and servers. They have asked for an extension of another 9-12 months before implementing the licensing regime, so they get enough time to set up the ecosystem.