It has also expressed “grave concerns” about companies being forced to source domestic components or IT products in some cases. (source). The government cites security as the main concern behind the domestic sourcing policy.
Reportedly, Robert Hormats, the US under secretary of state for economic growth, in his recent meeting with Commerce and Industries Minister Anand Sharma, said that it will impact US investments in India.
Earlier this month, the Ministry of IT and Communications notified government agencies that it must give preference to locally manufactured electronics. The government has given a March 2014 deadline to implement this new rule.
This would essentially mean that foreign electronics manufacturers will be shut out from large government projects. For instance, telecom equipment makers Huawei, ZTE and others will not be able to participate in the multi-billion dollar national optical fiber network (NOFN) project. For the Rs 21,000 crore telecommunications project India has made 100 % domestic sourcing mandatory. The list of approved Indian vendors include Himachal Futuristic Communications, ITI, Tejas Networks, C-DoT, VMC Systems, Prithvi Infosystems, Sai Systems, United Telecoms and SM Creative.
Such measures, while giving a boost to the local industry, will impact India’s attractiveness as an investment destination.
Meanwhile, the US has also been exercising protectionist measures to protect American jobs. It has been urging its companies to bring manufacturing back from China and software jobs back from India. Apple and a few other companies have promised to manufacture some of their products in the United States. A high profile litigation involving India’s top outsourcing company Infosys and employees in the US found a lot of political backing in the US.
Recently, the US also introduced a startup Visa in the senate. If cleared by the congress, the proposed startup Visa will make it easier for entrepreneurs from countries like India to immigrate to the United States and start businesses. This could also accelerate the Indian startup brain-drain to the US.