US opposes India s IT goods sourcing norms

Within days of the government notifying rules that provide preference to locally-made electronic goods, the US has protested the move saying that it will adversely impact investment by American companies. Senior government officials said that US under secretary for economic growth, energy and environment Robert Hormats had raised the issue during his meeting with commerce & industry minister Anand Sharma last week.

Sources said the US official told his Indian counterparts that American companies were worried about the local content requirement and preferential market access although they are interested in the information technology sector.
He is learnt to have said that the Indian government regulations may result in US giants having to give up on the supply chains that they have developed over the years. The Indian government has, however, said that preferential access for locally manufacturing electronic goods was inserted in the National Policy On Electronics due to security considerations and relates only to government procurement. "There is no restriction when it comes to purchase by the private sector. Some of the foreign countries are getting unnecessarily worried," said an official.

On January 31, the department of IT had notified a policy that provides preference to locally-manufactured desktop PCs, laptops, tablets and Dot Matrix Printers in government procurement. The rules prescribe that locally-manufactured products will be given 25-50% preference in value terms. Although the rules only relate to government procurement, foreign companies are worried as the Centre and the states are now among the biggest buyers of PCs — desktops, laptops and tablets — as well as printers.

In fact, thanks to AIADMK's election promise Tamil Nadu became one of the biggest buyers of computers and now offering laptops or tablets has become a norm of sorts in election manifestoes. Even in cash-strapped Uttar Pradesh, chief minister Akhilesh Yadav had promised tablets.

In any case, with both the Centre and the states according top priority to school education, education departments have now become major buyers of computers.

In the past too, several countries have opposed the purchase preference policy for locally-manufactured IT goods but the government has resisted any pressure and has gone ahead and notified the rules.

The government reckons that by stipulating this clause it will get global giants to set up manufacturing facilities in the country, and, in the process, generate employment and investment. Even the US has had the Buy American Act for several years to push local manufacturing.