Economists and strategic affairs experts argue that the Information Technology Agreement (ITA) of 1997 between India and the United States prevented India from developing a world-class computer hardware industry like China and Taiwan.

The agreement eliminated tariffs on IT-related goods and services, but Washington persuaded New Delhi to focus on software and services instead of nurturing hardware production. At the time, Indian industry had pushed to retain tariffs to support domestic growth.

Strategic affairs analyst Divya Kumar Soti noted that India “ceded away” its hardware potential under U.S. pressure, as media narratives projected India as a software superpower. He warned that the country remains dependent on U.S. platforms, with AI now threatening outsourcing and H-1B jobs.

Economist and NITI Aayog member Dr. Arvind Virmani said he had opposed the agreement in 1997, predicting it would create an inverted duty structure that undermined domestic electronics production.

While India remains a global leader in software talent, the Modi government is now pushing to close the hardware gap through Make in India and production-linked incentive (PLI) schemes, targeting sectors like semiconductors, electric vehicles, and drones.