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PC sales slow down, industry eyes tax breaks

India's computer industry association said on Friday that it scaled down its personal computer (PC) sales forecast for 2000-01 after a second quarter slowdown, and eyed tax breaks to boost the industry.

"With less than expected sales of PCs, especially in the second quarter, the projection for the annual sales for 2000-01 (April-March) has been revised from 1.9 million units to 1.75 million units," the Manufacturers' Association of Information Technology said in a statement.

PC sales in 1999-2000 totalled 1.4 million units.

MAIT officials said the unprecedented slowdown could be because a depreciation of the rupee had increased costs and customers could be waiting for a further fall in PC prices.

"The rupee-dollar rate has not been as steady as in the previous years. There has been a creeping devaluation...," MAIT president Vinay Deshpande told a news conference.

Vinnie Mehta, MAIT's director, said the industry was looking for lower import duties on computer components in the 2001-02 federal budget expected at the end of February. "Hopefully, our hardships will end," Mehta said.

Desktop PC shipments totalled around 834,000 in the April-September period of 2000, up 26 per cent from around 663,000 in the year-ago period, MAIT said.

The sales and forecast figures are based on an extensive sample survey conducted by the Indian Market Research Bureau, involving 14,000 respondents in 16 Indian cities.

The survey takes into account a vast, unorganised market for cheap PCs assembled by small firms which aggressively compete with multinational and national brands.

MAIT said multinationals gained market share in the first half of 2000-01, moving up to 24 per cent from 21 per cent in the year-ago period, while assembled PCs increased their share to 59 per cent from 57 per cent.

Both gained at the cost of Indian brands, whose share went down to 17 per cent from 21 per cent.

The business sector accounted for 76 per cent of purchases, and households the rest. Business purchases grew 19 per cent year-on-year in the first half, while household sales grew by 53 per cent, helped by growing Internet penetration.

Digital devices could yield demand

MAIT officials said their survey revealed a latent demand of around one million devices for cheap Internet devices for e-mail or chat which are expected to hit the market in the near future.

The industry said it had made strong budget recommendations seeking tax cuts to boost computers, particularly in view of the planned introduction of an import duty-free regime from 2003 under a World Trade Organisation agreement.

Mehta said the date should be pushed back to 2005, unless the government immediately abolished import duties on computer parts.

India's customs duty regime is complex, with a series of customs duties being topped by other import duties imposed to offset commodity taxes imposed on domestic manufacturers.

Currently, finished computers have a basic customs duty of 15 per cent.

Electronic components invite an import duty of up to 5 per cent but the duty on other components like plastic used in computer making can be as high as 35 per cent, Mehta said.

Besides a cut in basic customs duty, the government should also abolish for both components and finished goods a 10 per cent surcharge on import duty and a 4 per cent special additional duty, MAIT officials said.

MAIT also demanded that an excise (commodity) duty of 16 per cent on all electronic goods be cut to 8 per cent.

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