Hard times ahead for Indian IT hardware

Written by P P Thimmaya | Updated: Mar 25 2013, 06:24am hrs
A slew of government regulations could set IT hardware players back. Manufacturers feel that these regulations are neither well thought out nor practical

Financial year 2013-14 will not exactly begin on a positive note for the Indian hardware industry as it will not only have to battle the downcast mood of the economy but also the myriad regulations of the government, which are likely to considerably slowdown its pace of growth. The Indian hardware industry, which primarily consists of the personal computer segment followed by those like scanners, printers, etc, have, by and large, not been given its due importance by successive governments. But now a slew of new regulations could set them further back.

The latest example is the Compulsory Registration Order 2012, which makes it mandatory for all hardware manufacturers to get certification from the Bureau of Standards (BIS) for their products. The government order lists products under-15 categories ranging from video games, laptop, notebook, tablet and plasma/LCD/LED televisions, to microwave, printers and scanners, telephone answering machines, electronic music systems, etc. Earlier, the government had brought its set of regulations to manage and control e-waste for the hardware industry, which led to a high tide of confusion.

The hardware industry has wholeheartedly welcomed these regulations, but their major challenges are in following the letter and spirit of the law. Alok Bharadwaj, chairman, international chapter, Manufacturers Association for Information Technology (MAIT), says, The problem is not with the regulations but the manner in which it is drafted. It looks like these policies are not well thought through and there has to be a realisation whether this is practical or not.

For example, the regulation on e-waste says that PC manufacturers will have to get certification from respective state governments and this has led to a host of issues as each government has got its own set of rules, with some of them charging fees for the certification while others doing it for free. This has become a major bureaucratic and administrative challenge for the hardware players as their manufacturing and distribution are extremely well spread and mostly globalised. Industry players say a common regulation would go a long way in alleviating their difficulties.

Similarly, the BIS certification has also put the industry at the wits end as there are not enough labs in the country that can test the products of the industry, thereby slowing down the launch of new global products into India. This could also choke the supply chain network of the hardware players while awaiting clearances for their products.

MAIT President J V Ramamurthy says, It will also have a huge impact on the Indian economy as there might be delays in the launch of new products and supply of key components in the market. This will eventually impact the consumers. The shortage and delays in supply will also severely hamper government and private projects, including ongoing e-Governance initiatives in India.

The industry on the whole has welcomed these initiatives as they feel that these measures will ensure that sub-standard and low-quality products will not enter the country despite certain inherent challenges in following these regulations. Added to these issues, the industry was also eagerly awaiting for certain policy initiatives from the recently-announced Budget, but they were disappointed. They were expecting that the Budget would provide a major thrust towards manufacturing which would be beneficial to all the players in the eco-system.

Acer India chief marketing officer S Rajendran says, The government could have afforded to exhibit more boldness and assertiveness in boosting the cause of wider IT adoption as also making India an attractive destination for investment in robust local IT hardware manufacture. It has been proven quite conclusively that economies that have higher IT penetration quickly enjoy the triple benefits of productivity, employability and transparency. The burgeoning pool of youngsters and the dent the country has taken in its image on probity were compelling reasons to have the government devote more attention and promulgate enabling policies for this sector.

Industry players opine that with the saturation of the market in the top tier cities, the PC players will now have increasingly looks towards the tier-II and tier-III centres for growth. This would not be possible with the same kind of price structure which is prevalent for the predominantly urban areas and a strong domestic manufacturing base would actually help in bringing down the prices lower.

According to IDC, the overall PC shipments for CY 2012 stood at 11 million units resulting into an year-on-year growth of 3.5% over CY 2011. It said that despite a drag on overall IT spending, the growth in the India PC market was driven by special projects like the Tamil Nadu government providing free laptops to students and also with the spurt in consumer demand for notebooks.

Kiran Kumar, research manager, IDC, says, In the face of ongoing challenges from a slowing economy and high inflation, the rise in consumer optimism is a welcome sign for the India PC market. This is reflected in the improved retail footfalls, particularly among large format retailers (LFRs), which continue to act as a catalyst in driving consumer demand.

On the other hand, the commercial PC business outside special projects, like that of the Tamil Nadu government, witnessed continued instability as the commercial desktops crumbled to a three-year low in the second half of 2012. The overall confidence of enterprises took a backseat as they were trying to cope with adverse business conditions and rupee volatility, says Kiran.

Despite these not-so-bright prospects, the industry is hoping that larger technology initiatives of the government like electronic delivery of services, Aadhar and other e-governance would provide them the boost in the forthcoming fiscal.