The IT hardware sector in India has been hit by the fluctuating forex fortunes, together with slackening market demands. Manufacturers? Association for Information Technology (MAIT) president Amar Babu tells PP Thimmaya that the sector can boom again with the right kind of enabling government policies as well as design innovation. Edited excerpts:

How is the Indian hardware industry faring in the current economic scenario?

This has been one of the toughest years for the industry and there are multiple reasons for it. One is of course the demand. In India PC penetration is still a mere 10% while in countries like Brazil, China and Russia it is 3-4 times that figure. Clearly there is a huge opportunity. However, when we look at the actual growth rate of the industry, one can see that the market is going down or is flat, especially when you take away government projects.

How is the industry tackling the fluctuating foreign exchange market?

Most of our members are struggling in terms of being profitable in this scenario. The industry has long-term contracts, especially with government bodies and large enterprises. The government does not have an exchange rate variation clause in the contracts as it is valid only for those that extend beyond a year. Further, we do not have any component manufacturing eco-system. Most of the components that go into manufacturing are imported. This creates an impact. We also have an inverted duty structure, where it is actually cheaper to import than to manufacture here. Hence, it does not truly promote manufacturing in the country.

How is MAIT dealing with these issues?

At MAIT we know that there is a strong long-term potential in India. And to realise this, effort is required from the members as well as support from the government. The pace of the industry?s growth will depend on what kinds of enabling policies we get from the government and how industry responds with its own innovation. Growth in the industry will be beneficial for everybody though the question is whether we can afford to have such a large sector without local manufacturing. MAIT is working with international chapters to enable more business in the country. MAIT is also evolving as an organisation by bringing together the various constituents of the IT industry to offer an end-to-end perspective.

Is the industry expecting fiscal incentives to boost manufacturing in India?

There should not be fiscal disincentives like the inverted duty structure. The lack of a component eco-system, which is the fundamental foundation, is hampering many players. If somebody wants to increase the local component quotient, one cannot buy, as for example there are very few motherboard manufacturers here. If the ease of doing business improves, players are ready to look at manufacturing.

How is the industry dealing with the requirement of BIS certification?

There was never a debate on the order. The debate was only on some capacity issues, testing infrastructure and line up of large number of products. We believe self-certification is the core to the process and the BIS is moving towards this. We are giving feedback to the government on how we can simplify and avoid overlaps. It is progressing at the right level and everybody has to play their role to meet the January 3 deadline.