Make in India: Challenges & Prospects

Why are US tech firms sceptical about Digital Trade with India?


From UPSC perspective, the following things are important :

Prelims level: NA

Mains level: India-US Tech Trade

Central Idea

  • During PM’s state visit to the United States, cooperation on technology emerged as a significant topic of discussion.
  • While the visit yielded positive outcomes, US tech companies have raised concerns about policy hurdles affecting digital trade with India.

Current Status of India-US Technology Trade

  • Bilateral Trade: In FY2023, the US became India’s largest trading partner, with bilateral trade reaching $128.55 billion. However, digital or technology services have not played a prominent role in this trade.
  • Deficit in Digital Services: The US has a significant trade deficit of $27 billion in digital services with India, despite the potential for growth in the US digital services export sector and the expanding online services market in India.

Concerns of US Tech Firms

  • Imbalance and Misalignment: US tech companies have raised concerns about the “significant imbalance” and “misalignment” in the US-India economic relationship. They argue that India’s policies favor domestic players, creating a tilted playing field.
  • Discriminatory Regulations: US tech firms criticize India’s regulations, such as geospatial data sharing guidelines, for providing preferential treatment to Indian companies. They also express discontent over India’s departure from democratic norms, leading to challenges for US companies operating in India.

Policy Barriers Raised by US Tech Firms

  • Equalisation Levy: US tech firms object to India’s expanded version of the equalisation levy, which imposes taxes on digital services. They argue that it leads to double taxation, complicates the tax framework, and raises questions of constitutional validity and compliance with international obligations.
  • Information Technology Rules: US tech firms are concerned about India’s Information Technology Rules, which impose compliance burdens and tight deadlines for content takedown, appointment of local compliance officers, and the establishment of Grievance Appellate Committees.
  • Data Protection Law: Ambiguities surrounding cross-border data flows, compliance timelines, and data localization in India’s draft Digital Personal Data Protection Bill raise concerns among US tech firms. They argue that data localization requirements increase operating costs and can be seen as discriminatory.

Other Policy Barriers to Digital Trade

  • Digital Competition Act: The proposed adoption of a Digital Competition Act, including estimated taxes for big tech companies, has raised concerns about anti-competitive practices and potential targeting of US tech firms.
  • Competition Commission Fines: The fines imposed by the Competition Commission of India on Google for anti-competitive practices have been seen by US tech firms as part of India’s protectionist industrial policy.

Way Forward  

To promote digital trade between India and the United States and overcome policy barriers, the following steps can be taken:

  • Transparent and Consistent Policies: Ensure transparency, consistency, and clear guidelines in policy formulation, implementation, and enforcement to create a level playing field.
  • Review and Refinement of Regulations: Periodically review regulations, such as the equalisation levy, Information Technology Rules, and data protection laws, to address concerns and strike a balance.
  • Mutual Recognition Agreements: Explore the possibility of mutual recognition agreements that facilitate the acceptance of each other’s certification standards and regulatory frameworks, reducing duplicative compliance requirements.
  • Data Sharing Frameworks: Develop comprehensive and secure frameworks for cross-border data sharing that protect privacy and enable data flows for digital trade, benefiting both economies.
  • Collaborative Research and Development: Encourage joint research and development initiatives between Indian and US companies and institutions to foster technological advancements and drive innovation in emerging areas such as artificial intelligence, blockchain, and quantum computing.
  • Cybersecurity Cooperation: Strengthen bilateral cooperation on cybersecurity, sharing best practices, and collaborating on threat intelligence to safeguard digital infrastructure and build trust in cross-border digital transactions.


  • By implementing these measures, India and the United States can foster a conducive environment for digital trade, innovation, and investment, strengthening bilateral ties and driving economic growth.

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