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Gather 'round one and all. Let me tell you the tale of why the PlayStation 5 costs so much money to buy in India.
The story starts in 1996.
The story starts in 1996.
A bunch of international lawmakers gather around at the World Trade Organisation, and decide as a bloc that tariffing computer stuff ("Information Technology Products") is not a very good idea.
So they collectively decide to PROHIBIT tariffs on computer stuff.
So they collectively decide to PROHIBIT tariffs on computer stuff.
The Information Technology Agreement is born. Under the watchful eye of the World Trade Organization, which is (surprise, surprise) a big supporter of world trade, 29 countries initially sign on in 1997.
One of those countries is the Republic of India.
One of those countries is the Republic of India.
In the years that followed, companies like Infosys and Tata Consultancy Services boomed like nothing anyone in the country could have ever saw coming. These guys imported computers and made India an outsourcing giant, a status we kind of retain even today.
The Information Technology Agreement is a huge boon to many companies around the world, and serves as a humble but important part of the world's evolution into the age of information, as the internet slowly but surely spreads across the world.
And the World Trade Organization, which (surprise, surprise) isn't a huge fan of tariffs, says, "wow, that was sweet, let's do that again."
This time, some WTO members propose an even more ambitious sequel to the IT Agreement: ITA 2.
ITA 2 proposes to get rid of tariffs on newer high-tech products like semiconductors and... video game consoles.
ITA 2 proposes to get rid of tariffs on newer high-tech products like semiconductors and... video game consoles.
But India does not like ITA 2. In a country ridden with holes in direct taxation, the country relies intensely on indirect taxation on what it (mostly correctly) deems privileged purchases, like petrol and expensive computers.
Even with all the benefits of ITA 1, India in the 2010s decides that ITA 2 is going to rob the exchequer of revenues that its incompetent direct taxation systems couldn't catch.
And so, India opted out. Just as India opted out of the Regional Comprehensive Economic Partnership.
And so, India opted out. Just as India opted out of the Regional Comprehensive Economic Partnership.
Yeah, India really hates trade agreements that require it to let Indians buy things at reasonable prices.
Anyhoo, of the many things that got caught in the crossfire of India's autarkic approach to taxation, video game consoles, deemed a luxury, got swept up.
Anyhoo, of the many things that got caught in the crossfire of India's autarkic approach to taxation, video game consoles, deemed a luxury, got swept up.
The end result? A country of over a billion with fewer than a million active game consoles pays a heavy price for the commodity. Around ₹13,000 will be paid to the government in terms of tariffs and GST for every PS5 Disk Edition to be sold.
Now, India isn't going to manufacture consoles. That's just not a reasonable expectation. It's not a hot commodity like mobile phones, which, for all its glory and growth, led Apple to assemble devices here very late, and mostly for tax purposes.
Gaming is very upstream: people buy consoles, they are addicted to it, and local development demand for higher-value (non-mobile) gaming grows, and could fuel the economy more than any kind of rent-seeking behaviour around next-generation consoles like the PlayStation.
But our tariffing policy has always been one of the fastest-responding part of governance; no wonder, as it pays the government's bills.
Buuuuut, as with decent electric vehicles, lining the treasury's pockets is always more important than any sort of long term outlook.
Buuuuut, as with decent electric vehicles, lining the treasury's pockets is always more important than any sort of long term outlook.
We happen to be a part of a lucky privileged 1% group that gets to save up and afford a half-lakh console. But is that growing gaming in India as much as a cheaper console would? I don't know. But basic economics always holds: lower the price, and more people will buy.
Then again, easing off on entertainment taxation is basically taboo for a poor country like India (oh, I'm sorry, "lower middle income country"). So, is it even ethical to run free market experiments like cutting tariffs on entertainment that may not pay off? I don't know.
But that's pretty much it: your consoles are expensive because a poor country with shitty tax enforcement has no option but to target consumption more heavily than income, because that's the easy thing to do. And it'll likely be that way for a long time. The end.
