A parliamentary panel has recommended that India should consider renegotiating or even exiting the Information Technology Agreement (ITA) under the World Trade Organization (WTO), pointing to the US’s unilateral exit from WTO obligations and use of tariffs to protect its domestic industry as a possible template, sources told PTI.
The Standing Committee on Communications and Information Technology, in its report, blamed the 1997 agreement for several challenges in India’s IT and electronics sector, including a widening trade deficit and loss of competitiveness to more advanced economies.
The panel observed that India’s experience with the ITA has been “most discouraging,” which “almost wiped out the IT/Electronics industry” in the country, while recognising the benefits for consumers in terms of reduced costs and access to technology.
Global trade shifts and ITA challengesWhile the Ministry of Electronics and Information Technology told the Committee that India, as a participating member of the ITA under the WTO, cannot unilaterally withdraw, the panel cited the US example to suggest that it seems “quite plausible” in the current scenario.
“The trade scenario created by the unilateral announcement of 50 per cent tariffs on India and different increased tariffs on other countries of the world by the US present both a challenge and an opportunity for India. The world trading order is changing fast and, therefore, India needs to undertake a proactive and well-calibrated approach towards ITA,” the report said, according to a source.
The Committee has called for free trade agreements at bilateral and multilateral levels between member countries in their mutual national interest. It also recommended a high-level empowered inter-ministerial committee, including the ministries of Electronics & Information Technology, External Affairs, Commerce and Industry, Finance, and other stakeholders, to holistically examine ITA 1.0 and ITA 2.0, their potential implications, and suggest a roadmap for India’s economic and strategic interests in view of shifting global alliances.
The Ministry of Electronics and IT told the Committee that in light of India’s experience with ITA 1.0, it has been decided not to participate in the expansion under ITA 2.0. The draft report, according to sources, said, “The Committee strongly feel that if the USA can come out unilaterally from WTO obligations, India should also see it as an opportunity to further negotiate at WTO for favourable clauses under ITA and may also weigh in the options for an exit.”
Domestic manufacturing push and incentivesThe panel noted that at the time of joining the ITA, India’s electronics sector was underdeveloped and premature tariff elimination exposed the industry to global competition, stifling growth. “By signing the ITA in 1997, India agreed to eliminate tariffs on a wide range of IT and electronics products, including semiconductors, computers, telecom equipment, and components without ample prudence or following the steps of caution,” the draft report said.
India’s commitments under ITA, the Committee noted, “have severely imposed restrictions and limitations on the country’s functional autonomy in regulatory and policy matters.” It also highlighted the absence of an exit clause: “Even more glaring and astonishing part is that there is no exit clause for the signatory member countries under ITA 1.0. The ITA did not provide any clear mechanism for renegotiating or withdrawing from specific tariff commitments, making it difficult for India to formally revise its obligations.”
The report also observed that India’s electronics manufacturing ecosystem remains fragile due to high import dependence for components, limited R&D and innovation, inadequate supply chains, infrastructure bottlenecks, and skilled labour shortages. “Despite the government initiatives like Make in India and PLI schemes, the sector still struggles to compete globally owing to cost disadvantages and low value-added production. Much of the electronics manufacturing that did occur in India was limited to the assembly of imported components rather than full-fledged production, resulting in low domestic value addition,” the report said.
While lauding initiatives such as the Production Linked Incentive Schemes and Make in India, the Committee emphasised the need for sustained policy support, infrastructure development, and increased investment in R&D and innovation. It also recommended financial incentives, including tax concessions and subsidies for startups and MSMEs, to catalyse and strengthen domestic electronics production and global competitiveness.
The Committee headed by BJP MP Nishikant Dubey adopted the report last week and submitted it to the Lok Sabha Speaker, with Parliament expected to take it up for adoption in the next session, the sources told PTI.
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