The price hike is attributed to rupee depreciation and increased taxes that have hit hardware companies.

Most manufacturers like Hewlett-Packard, HCL Infosystems, Lenovo, Dell and Acer have production units in India. These units largely look at product configuration, value added distribution & customer services and reverse logistics in India, and the major components, like memory and LCDs, are imported. The rupee has fallen 8.3% in 2008 since January, the worst fall since 1993, when it depreciated by 8.75% in the same period. It was trading at Rs 39.90 to a dollar on March 31, 2008, but has depreciated to Rs 42.90 per dollar. According to analysts, the hardware companies have tight profit margins and therefore have been in a wait-and-watch mode on prices. They are slowly pushing the burden of rupee depreciation on channel partners and end consumers.

Another important factor contributing to the price rise is the greater adoption of LCDs and levy of taxes. Sumanta Mukherjee, manager, computing products research, IDC India, says, "The increase in the average sale value (ASV) of desktop PCs is on account of an increasing adoption of TFT/LCD monitors and a change in tax regulation-the levy of excise duty on MRP rather than on the `street price' or the market operating price."

HP, which has been the market leader for notebook PC and desktop PC market, has extended a price hike of 13% to all components. George Paul, executive vice president, marketing, HCL Infosystems, says, "We announced the price hike on our various products from 5%-10%, but if the input prices go up, we will reconsider our price points." Analysts say companies like Lenovo and Dell are likely to follow suit.