| Abstract: |
India's software and services exports have been rising rapidly. The annual
growth rate ranges between 20 -22% in IT services and nearly 55 % in
IT-enabled services (ITES), such as call centres, Business Process Outsourcing
( BPO) and other administrative support operations. Together they are
predicted to grow at 25% pa till 2010.The IT industry is highly export
oriented and the exporters are predominantly Indian. The Indian BPOs (ITES)
are moving up the value chain, handling high end data for airline information,
insurance, banking sector and mortgage companies, enterprise resource
planning, among others. Some of the companies have already moved into
significantly higher value added segments such as mission- critical
applications, development and support, product design, HR Management,
knowledge process outsourcing for pharmaceutical companies and large complex
projects. Software exports make up 20 % of India's total export revenue in
2003-04, up from 4.9 % in 1997.This figure is expected to go up to 44% of
annual exports by 2010. Though India accounts for just about 3 % of the world
market for information technology services, this sector has been growing at a
scorching pace, helped by a large pool of English-speaking workers, nearly 4
million engineers and the increasing tribe of tech-savvy entrepreneurs in the
country. The Information Technology industry currently accounts for almost 4.8
% of India's GDP. It will account for 7 % of India's GDP by 2010. Software and
IT enabled services have emerged as a niche sector for India. This was one of
the fastest growing sectors in the last decade with a compound annual growth
rate exceeding 50 per cent. Software service exports increased from US $ 0.50
million in 1990 to $5.9 billion in 2000-01 to 23.6 billion dollars in 2005-06
recording a 34% growth. A compound annual growth of over 25% per annum is
expected over the next 5 years even on the expanding base. The impact on the
economy of projected software and IT enabled service exports of $ 60 billion
by 2010 is likely to be profound. One manifestation is that India notched up a
current account surplus in 2001-02, for the first time in 24 years. India
further needs an open environment under GATS to promote exports of services
through outsourcing and off-shoring . The present study examines the growth
performance of India’s IT industries, with particular attention paid to the
role of policy in this process. The study recognizes that emergence of a
strong Indian IT industry happened due to concerted efforts on the part of the
Government, particularly since 1980s, and host of other factors like
Government-Diaspora relationships, private initiatives, emergence of software
technology parks, clustering and public private partnerships. In this study we
further look at the major parameters of the Indian IT and ICT industry in
global context and give justification for including the main factors
responsible for the IT boom in India. The study has looked into the past and
present trends of the Indian IT industry and has considered further needs of
IT sector to act as a catalyst of growth and development. The study has
examined whether the Indian IT growth does have enough lessons for other
countries to model their IT policy which may help them to shape their IT
industry as driver of growth and development. IT firms were actually required
to export software in the early days of the industry. This arose in the
context of a shortage of foreign exchange in India in the 1970s and early
1980s.Software firms that needed imported inputs were required to earn foreign
exchange themselves through export of software. This enabled them to get an
idea of global markets very early. Besides formulating the national vision to
promote software industry in India in the early 1980s by the government, there
were deliberate attempt by the companies to promote software production like
compilers, device drivers and operating system to cater to the domestic
hardware sector. The high tariffs for the hardware sector had meant that the
production of domestic hardware segment (including PCs which were introduced
in the same period) had to be sustained requiring necessary software’s like
operating system and drivers. Subsequently by mid 1980s, software started
coming up unbundled with the hardware. This further gave fillip to the
software industry and exports. The 1990s and early 2000 saw the rise of
Software Technology Parks and formation of the Ministry of Information
Technology, respectively. Despite liberalization of the 1991, the software
industry flourished signifying the inherent strength that it developed due to
benign and enabling environment provided over a period of time and also the
fact that the 1990s saw the dramatic decline in telecommunication costs
(government explicit intervention) and the commercialization of the internet
along with the Y2K “problem”. The Data Envelopment Analysis (DEA) model is
used to work out technical efficiency of Information and Communication
Technology ( ICT) Industry in host of countries which are front runners as far
as ICT is concerned. India lags behind the most as far as ICT (not IT) is
concerned. However, information and Communication technology industry has
brought revolution in India because it has reduced intermediation in business
and society, provided solutions across sectors and is increasingly becoming an
important tool for national development. DEA is also applied to benchmark the
performance of the 92 Indian Software Companies for 2005- 2006. The impact of
various determinants on technical efficiency of the Indian Software companies
is worked out using tobit regression. The impact of the explanatory factors on
net exports of 92 software firms in 2005-06 is also worked out using simple
regression exercise. The study also works out technical efficiency of 36
telecommunication firms in India and examines the determinants for new
technology adoption by such industries. The study uses a Malmquist index to
estimate total factor productivity changes decomposed into efficiency change(
catching up to the frontier technology) and technical change( movement of the
frontier) for the common software firms existing between 1996 and 2006
E-government is the application of Information and Communication Technologies
(ICT) by government agencies. Its use promises to enhance the effectiveness
and efficiency of government and alter its relationship with the public. The
study outlines E-Governance models for effective governance and for higher
agricultural growth and development. E-Commerce primarily refers to buying,
selling, marketing and servicing of products or services over internet and
other computer networks. E-Commerce in India is just taking off with the
advent of Railway and Online Air bookings and Net banking. The business is
likely to grow to Rs 2300 crore by 2007 .Electronic commerce allows efficient
interactions among customer, suppliers and development partners cutting down
on transaction time and reducing the costs of doing business. The role of
government is to facilitate the development of E-Commerce. For promoting
South-South Cooperation and making it meaningful, the governments of the
member countries need to pool resources and capabilities in R&D and human
resource development for harnessing the fruits of Information and
Communicating technologies. The study spells out in detail a number of
examples where ICT has been used by rural communities for their benefit and
for policy and development goals of the government in general. Web based
software development and software product development (like device drivers) is
necessary for providing complete business and consumer oriented solutions.
These are also areas of interest for the Indian IT entrepreneurs to work upon
in times to come. India’s relatively unsafe e-security environment is costing
the BPO/ITES industry. The new IT Act (2000) needs to crucially define cyber
harassment, phishing and cyber stalking to take care of cyber crimes in India.
With the Indian IT/BPO exports to reach $60 billion by 2010, such companies
need to invest in upgrading security measures for sustaining competitiveness.
Organizations are not obliged under the IT Act to implement data security
measures to protect consumers and clients. All this makes it obvious that
qualitative progress cannot be made without enacting comprehensive data
protection legislation. The Information and communication technologies (ICT)
indicators of India are 13 million PCs, 40 million internet users- country
with the fifth-largest number of Internet users,143 million mobile phones and
60 million subscribers for fixed lines in 2006. These are modest figures in
comparison with the ICT penetration indicators achieved by the front runners
like Taiwan, South Korea, Japan, UK, US, Nordic countries in Europe, among
others (see the text for our strength and weaknesses in the ICT infrastructure
in comparison with some other front runner countries). India’s Strengths lies
in its availability of pool of scientists and engineers and quality of maths
and science education along with quality of business schools. We are also
ranked quite high in terms of cluster development, foreign technology
licensing and Government prioritization of ICT. The weaknesses are the
telecommunication infrastructure and speed of new business registration.
However, Information and communication technologies(ICT) has brought about
revolution in India particularly since 1990s .This is because it has reduced
intermediation in business and society, reduced mobile and fixed telephony
rates(because of concerted policy interventions by the government), provided
solutions across sectors, provided both CDMA and GSM mobile technologies (and
now Wi-Max technologies for internet access at different public places using
PC), re-organizing firm level behavior, empowering individuals by providing
them with more information and is increasingly becoming an important tool for
national and rural development through E-governance, E-Banking and E- Commerce
programmes. In addition, the success of the Information Technology industry in
India is intertwined with information and communication technologies as most
of the Information technology enabled services use such technologies for
providing their services. The quantitative results of the paper answers the
following- what orientations in inputs should be done by inefficient software
and telecommunication firms and ICT Industry in general to reach the ‘ best
practice frontier’( and have operational excellence), examines the
relationship between technical efficiency and net exports of software firms
along with the impact of host of explanatory factors like size of firms in
terms of sales and total cost, among others on technical efficiency and net
exports for cross section of software firms using tobit analysis, gives some
reasons for relatively low ICT penetration in India and what can be done to
transform India’s relatively good ICT readiness and ICT environment into
higher ICT usage, answers why telecommunication firms are adopting new
technologies and estimates total factor productivity changes in software firms
which can be further used to model wage and price estimation of products and
services offered by software firms over time. The paper confirms the
improvements in productivity, efficiency change and technical change of the
Indian Software industry from 1996 to 2006. Synopsis Chapter Wise Chapter one
describes the major parameters of the Indian Information Technology (IT)
Industry in India today and in the immediate past. The chapter further
analyzes the reason for the ‘boom’ in the Indian IT sector. We also outline an
electronic governance Model which can become a tool for effective governance.
DEA is applied to benchmark the performance of the 92 Indian Software
Companies for 2005- 2006. The impact of various determinants on technical
efficiency of the Indian Software companies is worked out using tobit
regression. The impact of the explanatory factors on net exports of 92
software firms in 2005-06 is also worked out using simple regression exercise.
. Further this chapter uses a Malmquist index to estimate total factor
productivity changes decomposed into efficiency change and technical change
for the common software firms existing between 1996 and 2006. Chapter two
gives an account of the position of the Indian Information Technology (IT)
Industry and the Indian Information and Communication Technology (ICT)
Industry in the global context and analyzes the strengths and weaknesses of
ICT Infrastructure across some countries. Technical Efficiency of the Indian
ICT sector is worked out using the mathematical model of Data Envelopment
Analysis. The study also works out technical efficiency of 36
telecommunication firms in India and examines the determinants for new
technology adoption by such industries. Chapter Three describes why and how
the Indian IT industry can act as a catalyst of growth and development. An
account of an effective electronic governance model for Agriculture Sector is
also given. Chapter Four looks at the past of IT industry since 1960s keeping
policy in mind. This chapter also outlines an export success model . Such
models can be emulated by other countries. Chapter five describes the hurdles
and constraints faced by the India IT industry and give an account of the
policies and strategies which can be adopted to address the hurdles and
concerns of the ICT sector. The last Chapter gives the conclusions,
suggestions and policy advice for making IT as a tool for addressing some core
inadequacies in the system like poverty, inequality, healthcare and education,
among others. |