The aim of Information Technology Agreements (ITAs) is to lower all taxes and tariffs on information technology products by signatories to zero. What impact should such agreements have on India's interests?
ITAs cover software, hardware, computers, telecommunications and electronic equipment, semiconductors etc. India was part of the WTO-led ITA-I which came into force in 1996, but has stayed away from talks to clinch ITA Phase II.
ITA-I had an adverse impact on India by making it heavily dependent on imports and stifling its domestic manufacturing industry. ITA-II also, if implemented, is expected to have a similar negative effect on India’s economy. At a time when the government is giving a push to the domestic manufacturing industry in India, ITA will lower barriers to trade, taxes and tariffs. This would be beneficial only to countries with a strong domestic IT equipment manufacturing sector. India, as a country with meager IT hardware exports, is expected to lose more than it gains due to the agreement. The lowering of barriers to trade will result in the Indian markets being flooded with cheap imported equipment. This will result in increase in imports and added competition to the existing domestic players, who will be at a disadvantage. Naturally, the domestic manufacturing industry in India will have to scale back its operations or close, which will affect employment rates. Hence, the ITA will adversely affect the Indian IT equipment manufacturing sector.
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