Software Industry

Software Industry

The Indian software industry truly symbolizes India’s strength in the knowledge based economy. Highly skilled human resources coupled with low wage structure and world class quality have transformed India into a global powerhouse in the Information Technology (IT) software services and solutions sectors.

The Indian IT industry has grown from US$ 0.8 billion in 1994-95 to US$ 10.1 billion in 2001-02. The figure below illustrates the growth of the Indian IT sector. Software and services exports are expected to account for more than 50 per cent of the sector turnover in 2001-2002.

• Despite a slowing global economy, Indian Software exports grew by 23 percent in 2001-02, while overall exports fell down by 2 per cent.

• India currently exports software to around 95 countries around the globe and more than 250 Fortune 500 companies have outsourced some part of their software requirements from India. North America and Europe accounted for 86% of Indian exports in 2000-2001.

• The growth of India as a software hub has also been facilitated by the initiatives taken by the Union and State Governments. Many State Governments have set up Hi-Tech Parks and implemented e-governance projects.

• Many global software majors have set-up operations in India. They include Microsoft, Oracle, Adobe among others.

• The government has also announced incentives for adhering to Quality Standards such as ISO 9000, SEI CMM by providing import duty concessions. Similarly, Exim bank subsidises the cost of acquiring the quality standard by around 50%.

• The growth of the sector has also been enhanced by a flourishing venture capital (VC) industry. The VC industry was estimated to be worth around US$ 408 million in 2000 and is expected to grow to US$ 10 billion by 2008. This shows a CAGR of around 50 per cent.

Policy Initiatives

• Besides Special Economic Zones (SEZs) and Export Promotion Zones (EPZs), the government is encouraging the setting up of Software Technology Parks (STPs). STPs offer zero import duty on the import of all capital goods, special 10 years income tax rebates, availability of infrastructure facilities such as high-speed data communication links, etc.

• Foreign companies can set-up operations in these zones either through incorporation of the company as per Indian Companies Act (with 100% equity holding), through a joint venture with an Indian company or through a wholly owned subsidiary.

Opportunities

• Strong cost value proposition, driven by the low cost of quality manpower and high quality work delivery.

• India has a large base of English speaking, skilled manpower resource with experience on state-of-the-art hardware and software platforms. This is supported by a flourishing IT education market, producing high quality software professionals across different areas in the field.

• The government has announced software export sector tax incentives-setting up of STPs and a VC funds.

• India has a well developed infrastructure support to aid connectivity and data transfers.