Manufacturers’ Association for Information Technology (MAIT) has over the last 34 years been a proud representative of India’s information and communications technology industry. Anwar Shirpurwala, Executive Director, MAIT, speaks about the association’s constantly evolving objectives, problems faced by the industry, and much more.

Aamir H. Kaki | January 2017 Issue | The Dollar Business

TDB: MAIT was set up in 1982. Has it been able to fulfil its mandate?

Anwar Shirpurwala (AS): The objectives of MAIT have evolved with time. The economy has come a long way since 1982 and there have been multiple changes in government policies since then. Based on these changes, the mission and objectives of the organisation have been revisited time and again. When MAIT was set up in 1982, the idea was very simple. Two things that we, as an association, wanted to do were to understand how computers can be manufactured in India; and how they can be proliferated across the country. In fact, the earlier governing boards of MAIT also had officials from the Department of Electronics (DoE), GoI. MAIT was the only association of its kind to have a government representative on the board.

Since its inception, what has not changed in MAIT is the basic idea of manufacturing in India. ‘Make in India’ may be a new term today, but we have always been talking about manufacturing in India. Most of our member companies have had their manufacturing plants set up in the country decades ago. That said, in the last three decades, we have seen a huge transition within the industry itself. A lot of home-grown Indian manufacturers came in and went, many of them shut their shops, some others shifted their businesses from hardware to software. MAIT today has members who are OEMs (original equipment manufacturers), ODMs (original design manufacturers), system integrators, solution providers, e-commerce companies, government nodal agencies, etc. Anything which falls under the broad gamut of information and communication technology (ICT) is a part of MAIT today. Our objective now is to enable the adoption of IT products and solutions in every field.

TDB: How are you encouraging your members to contribute to government’s ‘Make in India’ initiative?

AS: ‘Make in India’ will happen in the real sense only when there is a perfect ecosystem and manufacturers find profitability.  No business will come to India because of emotional reasons or just because a big programme has been launched by the government.

Businesses are not run on emotions, they run on healthy balance sheets. Therefore, ‘Make in India’ is not a motivational exercise for us; it is a business exercise. And the result of a business exercise should be profits. The current ecosystem in the country is not strong enough to speed up the manufacturing process. This is the reason that progress has been slow on this initiative.

To help the industry, we continuously engage with the government and make them understand what needs to be done. Creating policies is important but making sure these are implemented is even more so. We are in constant dialogue with government, be it Centre or state governments, on how to improve the ecosystem. We work with them and, wherever possible, we help them to make changes to improve the business climate.

TDB: Inverted duty structure is making many ‘Made in India’ goods uncompetitive against finished product imports. What is your take on this?

AS: Inverted duty structure may not be the right term to use in this context. The right term is disability. There could be many factors which constitute this disability – be it taxes and duties, supply chain, logistics, ease of doing business, and so forth. Now, as a country, disability is higher in India as compared to many other manufacturing nations. So, this disability has to be reduced.

Therefore, our engagement with the government is purely on how to reduce this disability in India. If you reduce this disability then India can come on par with other countries. But just coming on par with other countries is not good enough; we have to be better than them in manufacturing the products.

My viewpoint is that every product has different disabilities. For example, some products have tax issues and some have issues with respect to the availability of components. While some others may have problems with market access. While we keep giving tax-related inputs to the government, we also tell them why there is a need for ICT manufacturing clusters. Our recommendations are holistic in nature and go towards enabling the ecosystem. And these include a favourable environment for foreign talent to come and work in our sector, improving the ease of doing business in our sector, making available components that the sector needs to manufacture and a host of other such other suggestions.

Hence, it is not always about unfavourable tax or duty structures. It’s more often about an environment that helps us run a profitable business. 

TDB: What challenges do your members face while exporting?

AS: Our members are largely into imports as there is a high demand for IT hardware products in the country. They also export, but the numbers are small.
Different countries have different norms and issues. Since Indian IT hardware export numbers are still very small, there are no major challenges that need to be addressed at this point in time – the situation also reflects the fact that very little manufacturing of IT products (that too for a small range of products) happens domestically. If a strong manufacturing base is set up in India, exports of IT, electronics and hardware products would also increase from the country.

TDB: So, what are the major issues with regards to imports?

AS: Issues related to imports are many and varied. Some of these are everyday business problems, while others are more complex. But, whatever issues come up, we take them up with the government. There are a lot of concerns related to IPR protection, ease of doing business, Customs clearance rules, timely clearance of goods, documentation, varying rates of duty on same/similar products, etc. So, we work on a case-by-case basis with the government and make them understand our point of view.

TDB: The value of rupee against USD is hovering at its lowest, at over Rs.68.50,  and is expected to go down further. How is it impacting ICT imports?

AS: As of today, there are many challenges in the external environment such as demonetisation, depreciation of Indian rupee against US dollar etc., which are impacting the IT business sector. Based on the current visibility, I would say that ICT imports will go down. You import only when your product is being consumed. If it’s not getting consumed and inventories are piling up, then it makes no sense to import.

As far as devaluation of Indian rupee is concerned, we have always talked about the Exchange Rate Variation (ERV) clause. The rupee exchange rate largely affects government projects or long-term infrastructure projects. For, there is a big gap between the time of signing of contracts and realisation of payment, and the rupee could have dropped in value. We can’t control fluctuation of the rupee, but what we can control are the bidding terms in the contract based on the ERV clause. The government has not agreed till date on this clause, but possibly they do need to revisit the issue now – if they are not able to control the rupee then they might as well help us reduce the impact of currency fluctuation.

TDB: The government has started its mid-term review of Foreign Trade Policy (FTP) 2015-2020. What suggestions do you have for the government?

AS: The review of FTP is a never ending job even though the government may say it’s a mid-term activity. What we are not happy with is the Merchandise Exports from India Scheme (MEIS) of the new FTP, which has brought down export incentive from 5% to 2%. It has hampered exports from our industry. We want the government to review the MEIS slab.

TDB: How do you see the IT industry growing in the next 5-10 years. What are your thoughts on ‘Digital India’?

AS: IT industry in India is bound to grow as the rate of adoption of technology looks to remain high. However, I think, it’s important that technology use in rural areas should go beyond just mobile phones. So, the real challenge remains technology adoption across the entire population of 1.3 billion. Currently, 70-80% of mobile users in India have feature phones. To be a true digital economy, every user should have a smartphone.

No doubt, smartphones adoption in India is growing at a healthy 30-35% year-on-year. But we also need to provide adequate capacity to use these devices, especially through shared infrastructure such as broadband, cloud storage, etc., and most importantly content. Going by current levels of IT proliferation in India, there would be a requirement of 400 million personal computers and at least 500 million smartphones in the next few years. So, India has huge potential for IT products. ‘Digital India’ is an ambitious programme. It is an integrated programme that requires significant effort at many levels to see the policy reach its ‘tipping point’ when it comes to implementation, action and impact.