New form of Licence Raj
Recent Events:
- The Indian government has issued an order requiring import licences for laptops, tablets, and other devices to be obtained immediately. The government then reduced the restrictions for firms, giving them three months to get an import licence.
- However, the government’s initiative has been criticised for supporting the licencing Raj, as it did before 1991. Prior to 1991, Indian administrations frequently utilised restrictive techniques to curb imports, such as quotas and increasing taxes.
Possible negative outcomes of such an initiative:
- This could pave the path for similar licencing requirements to be implemented in other areas, giving bureaucratic discretion more leeway.
- Such limits on economic activity would only serve to dampen the vigour that the 1991 reforms unleashed.
It may, however, help to reduce imports and promote domestic electronic industries:
- The action appears to be intended to increase domestic manufacturing while decreasing Chinese imports.
- Imports of personal computers, laptop computers, and other electronic gadgets totaled $5.3 billion in 2022-23, with China accounting for the lion’s share.
- However, equipment manufacturers have had no notification or time to prepare. In the short term, this move may cause unneeded interruption, as well as supply shortages and higher equipment pricing.
- While the huge market that India provides may entice firms to manufacture there, there may be cost implications.
- Furthermore, it is one thing for the government to create policies that promote the growth of a computer manufacturing ecosystem in the country, and quite another for the government to achieve its goals with a sledgehammer.
Recent government actions that analysts have criticised for following socialist past policies that have hurt India’s economy:
- The policy establishment has far too frequently drawn inspiration from the country’s socialist heritage in recent years.
- For example, the government recently limited rice exports and restricted pulse stock holdings.
- It had also included credit card spending in the liberalised remittance plan, which is presently on hold, which meant that card transactions outside India would be subject to a higher TCS (tax collected at source).
- Such efforts imply that, while the majority of the country has moved on from its socialist past, the establishment has not, or has not gone on sufficiently.
Conclusion:
- This trend has the potential to undo the economic gains gained by the country since the dismantling of the licence permit raj in the 1990s.
- As a result, the government should give firms appropriate time and care when formulating such rules before implementing them.
