IT pact with US in 1997 crippled India Inc from producing world-class hardware: Experts

New Delhi: Economists and strategic affairs analysts on Saturday argued that the Information Technology Agreement of 1997 between India and the United States actually crippled India Inc, against its wishes, from producing world-class computer hardware like China and Taiwan.

In 1997, the US and India sealed a pact that removed tariffs and barriers to trade in all services relating to information technology.

However, the then Bill Clinton administration in the US convinced New Delhi that India should play to its strengths in software development and relation services, while the Indian industry was keen to maintain tariffs on computer hardware in order to nurture its growth.

In a post on X social media platform, strategic affairs analyst and columnist Divya Kumar Soti said: “Do you know that India ceded away hardware sector to the United States as part of Information Technology Agreement of 1997 against the wishes of India Inc! Clinton administration pursued GoI to remain confined to software and allied services (call centres) and remain out of hardware sector. But for this agreement, today India Inc would have been producing world class computer hardware like China and Taiwan”.

Soti further argued that the US-sponsored ecosystem in India “sold this beautifully to Indians as one magazine after another and one news channel after another told us day and day out that we were the software superpower”.

“Today, the reality is exposed. We are such a superpower that as we are forced to enter into a confrontation with the United States, we don’t even have an email platform of our own. Our IT sector is heavily reliant on the US for remaining profitable. Hundreds and hundreds of our engineering colleges churn out substandard CS graduates who can only do the jobs which are going to be taken over by the AI very soon,” Soti stressed.

That is why with the advent of AI, Americans now find themselves in a position to threaten outsourcing and the H1-B system, the X post added.

Responding to Soti’s post, Dr Arvind Virmani, economist and member of NITI Aayog, said he was probably the only economist who opposed this (India-US) agreement, based on economics of tariffs.

“After doing 5 yrs of tariff reform (1991+), It was clear to me, that it would produce an inverted duty structure and destroy domestic production of electronics assembly,” Virmani informed in his reply to the post.

Today, India produces world’s best software engineers but somewhat lack on producing hardware – a scenario which the Prime Minister Narendra Modi government is aiming to change with its bold reformist policies and initiatives line ‘Make in India’ and production-linked incentive (PLI) schemes, which can transform the country into a global manufacturing hub in several sectors like semiconductors, electric vehicles and drones in the near future.

IANS