The world?s most coveted technology companies could begin manufacturing operations in India if enabling policies are put in place, says Manufacturers? Association for Information Technology president Alok Bharadwaj. In an interview with FE?s PP Thimmaya, Bharadwaj talks about the issues faced by the hardware sector and the Union Budget?s impact on the sector. Excerpts:

What changes do you foresee for the Indian hardware industry after the Budget?

The most important task of any government is to provide drivers for the growth of industry. In case of the IT hardware industry, there are two ways such drivers are injected. One, by higher absorption of IT in various government investments, and the other is by creating environment that expands private investment and penetration of IT. Some positive announcements like the move to allow external commercial borrowings for modernising toll systems throughout the country will increase ICT adoption and increase efficiency. The decision to fully computerise the PDS system is a big move, which will definitely have positive implications for the hardware industry. One negative implication is the increase of excise duty as well as the service tax from 10 to 12%.

The Budget has not addressed some of your key demands…..

The hardware industry continues to face many hurdles and one of them is the inverted duty structure wherein import of parts and components attract higher duties than the finished products. This has resulted in many manufacturers closing down their facilities and turning into traders. In a highly competitive global market condition, already down by recessionary perils, it would be really hard for Indian hardware manufacturers to have a level playing field with competitors in China or Taiwan, or even Vietnam.

What is the way forward for the industry in that case?

Our biggest argument is that if India wants to create millions of jobs and if manufacturing has to get topmost priority, the policy has to be the driver. India has focused on IT software & services during the last decade and turned a sleepy sector into a vibrant global force. The time for scripting a similar success story for IT hardware sector has come. While for software and services, lack of government intervention helped the industry to prosper, in case of the hardware industry, lack of intervention will cause a demise of local value creations. Hence the alarm bells are ringing and the industry expects more hand holding from the government.

India lags far behind in competition. So what can be done to bridge the gap?

India lags far behind Thailand, China and Taiwan, when it comes to manufacturing. After the 2011 Japanese tsunami and Thailand floods, diversifying risk is a big factor for all global companies, and indeed, the world is looking at India as a possible alternative destination. Better infrastructure, political stability, consistency in policies and strong visible intent that such investments are wanted and welcomed are few of the points that need discussion at the macro level. The best way is to ask the investing companies what will make them come to India and let them answer. We do not need to create our own answers.

Can we expect companies like Apple to set up their manufacturing operations in India?

Why just Apple and why just expect! We must shape our policy framework and strengthen our accountability system to get all large manufacturing companies to invest in India. Once the appropriate policies are in place and the investment atmosphere becomes conducive, we believe there is no reason why IT giants such as Apple won?t consider India as a manufacturing destination.

What does the immediate future hold for the sector?

This fiscal, we have had to grapple with the floods in Thailand and Rupee devaluation. However, the contracts from the Tamil Nadu government for laptops, as part of poll promises, came as a big rescue, which accounted for 25% of the market size of the laptop industry. Now the uncertainties of past year are well behind us and we hope there would be significant spending from various state governments. So the outlook for 2012-13 is bright. Lot depends on investment sentiments and expansion mood in private sector. If the Reserve Bank of India reduces interest rates, we will see lot faster expansion.