NEW DELHI, Apr 2: The Information Technology Agreement (ITA), which India joined in 1997, has proved to be a barrier for the domestic electronic manufacturing sector's growth and also led to "domination of [a] few companies" in the market.
The agreement has also resulted in trade imbalances and Department of Electronics and IT (DeitY) has also flagged the rising security implications of IT goods being imported under the ITA, a senior government official said.
ITA is a plurilateral trade agreement, which deals with IT products (electronics). About 75 WTO (World Trade organisation) countries are signatories to it including the US, China, Japan, and all the 27 European Union nations.
"Domestic manufacturers face hardships due to lack of an eco-system compared to their foreign competitors, who are able to produce products at a lower cost. The ITA has resulted in a sharp decline in investments in electronic hardware manufacturing in India and a dependence on imports," he said.
A total of 217 IT products are part of ITA, which covers almost all electronic goods including IT hardware and telecom products.
Another official said if the electronics market in India is studied, the agreement has resulted in domination by few companies for most ITA products like semiconductors, mobile phones, memories, displays, telecom equipment, PCs, laptops, tablets, among others.
Without naming the companies, the official said: "This (ITA) has reduced competition and given undue influence to major companies to dominate the market here."
Another area of concern is the security implication regarding these imported IT products, he said.
"Apart from strategic sectors like Defence, Atomic Energy, Space and Internal Security, the growing use of these IT products in sectors such as telecom, power and transport makes these sectors vulnerable to cyber attack. It also has implications in case of malfunctioning," the official added.
Many countries now consider security issues and use them as a barrier to prevent the inflow of free IT products taking into account the sensitive nature of technology today, the official said.
"It was considerations like these that major emerging economies such as Brazil and South Africa did not join ITA," the official added.
Another concerning issue, the official said, is the trade imbalance.
"India's import of ITA products hit $33 billion in 2011, while exports stood at a mere $10 billion leading to a huge trade imbalance. This has grown further. This is also the case in trade of ITA products with China," he added.
The US, Canada, Japan, EU, Singapore and Hong Kong which account for about 80 per cent of the trade in ITA products are trying to broadening scope of the agreement, but India has decided to skip the negotiations citing protection of national interest, the official said.