India plans to oppose the second instalment of the World Trade Organization’s (WTO) information-technology agreement that proposes to do away with import tariffs on consumer durables and electronics items.
Signing the pact could result in a further disadvantage to the domestic electronics manufacturing industry, which lags because the country signed the first version of the agreement in 1996 and companies had little incentive to manufacture in India, officials of the department of electronics and IT and commerce said.
The new pact intends to include more consumer durable products such as air conditioners, refrigerators and washing machines under the label of IT products.
“India is resisting such moves,’ a government official said, requesting anonymity. “We will not be part of any such agreement.”
The cabinet had just cleared the country’s electronic policy that provides incentives for promoting indigenous manufacturing.
“If we bring down customs duty on such items to zero at this stage, we will only be shooting ourselves in our foot,” the official said.
India’s electronics manufacturing industry is suffering today because it signed the first instalment of the international agreement, another government official said, also declining to be named.
The argument in favour of pact is that it reduces prices due to economies of scale besides enabling developing countries to reap the benefits of cheaper technology. However, it also leads to concentration of technology in the hands of a few companies and, therefore, countries, the second official said. “It’s an agenda driven by a few companies and we have taken a position to not join it this time.”
India’s electronics manufacturing industry is projected to grow at an annual pace of 22% to $125 billion (Rs.6.8 trillion) by 2014 and $400 billion by 2020, according to official estimates. However, if local manufacturing is not provided incentives, India’s cost of importing electronics may exceed its crude import bill—$300 billion by 2020.
Participants to the agreement have grown to 70, representing about 97% of world trade in information technology products, according to information available on the world trade body’s website.
The talks for second instalment began earlier this year.
Each country will propose a set of items that should be included in the pact before a final list is drawn up. An official with a lobby group, who is aware of the country’s anti-pact stand, said it could invite pressure from large multinational technology companies, especially from the US, which see India as a huge market. He too requested anonymity.
Developed countries are trying to achieve some of their non-agricultural market access aspirations in the guise of the latest proposal, said Biswajit Dhar, director general at Research and Information System for Developing Countries, a New delhi-based think tank.
While developed countries have been pushing developing countries such as India and China to accept heavy tariff cuts in some of the industrial sectors under the languishing Doha round of trade talks, India has been maintaining that any such tariff reduction has to be voluntary and cannot be forced upon developing countries.
The government last week approved a national electronics policy, which includes incentives for semiconductor fabrication units and industrial clusters for manufacturing electronics. The cabinet had in July also approved a Rs.10,000 crore package of incentives for makers of electronics products and components under the so-called modified special incentive package scheme.
The policy also specifies standards for electronics imports to stop spurious goods from entering the country. A proposal for electronics clusters has also been approved. The government will offer incentives of Rs.50 crore each to 200 clusters set up by manufacturers.
Moreover, the government has also reserved 30% of all its electronic procurement for companies that can add at least 25% of domestic value to products in the first year of the policy being implemented.