Information Technology (IT) industry in India is one of the fastest growing industries.

OriginThe origin of IT industry in India can be traced to 1974, when the mainframe manufacturer, Burroughs, asked its India sales agent, Tata Consultancy Services (TCS), to export programmers for installing system software for a U.S. client.

Problems before 1984:

• Local markets were absent and government policy toward private enterprise was hostile.

• During that time Indian economy was state-controlled and the state remained hostile to the software industry through the 1970s.

• Import tariffs were high (135% on hardware and 100% on software) and software was not considered an "industry", so that exporters were ineligible for bank finance.

Government policy towards IT sector changed when Rajiv Gandhi became Prime Minister in 1984..........

• His New Computer Policy (NCP-1984) consisted of a package of reduced import tariffs on hardware and software (reduced to 60%), recognition of software exports as a "delicensed industry", i.e., henceforth eligible for bank finance and freed from license-permit raj, permission for foreign firms to set up wholly-owned, export-dedicated units and a project to set up a chain of software parks that would offer infrastructure at below-market costs.

These policies laid the foundation for the development of a world-class IT industry in India.

The Indian Information Technology sector can be classified into the following broad categories

IT Services Engineering Services

ITES-BPO Services

E Business

IT Services can further be categorized into :

• Information Services (IS) outsourcing,• Packaged software support and installation, • Systems integration, processing services,• Hardware support and installation and • IT training and education.

Engineering Services include :

• Industrial Design, • Mechanical Design, •Electronic System Design (including Chip/Board and Embedded Software Design), • Design Validation Testing,• Industrialization and Prototyping.

IT Enabled Services are services that use telecom networks or the Internet.

For example,• Remote Maintenance,• Back Office Operations, • Data Processing, Call Centres, • Business Process Outsourcing, etc.

E Business (electronic business) is carrying out business on the Internet; it includes buying and selling, serving customers and collaborating with business partners.

Strengths of the Indian IT sector:

•· Highly skilled human resource;•· Low wage structure;•· Quality of work;•· Initiatives taken by the Government (setting up Hi-Tech Parks and implementation of e-governance projects);•· Many global players have set-up operations in India like Microsoft, Oracle, Adobe, etc.;•· Following Quality Standards such as ISO 9000, SEI CMM etc.;•· English-speaking professionals;•· Cost competitiveness;•· Quality telecommunications infrastructure.

Weaknesses of the sector:

•· Absence of practical knowledge;

•· Dearth of suitable candidates;

•· Less Research and Development;

•· Contribution of IT sector to India’s GDP is still rather small;

•· IT development concentrated in a few cities only.

Market Trends

• The Indian IT industry accounts for a 5.19% of the country's GDP and export earnings.• It provides employment to a significant number of its tertiary sector workforce. • 2.5 million people are employed in the sector either directly or indirectly.• In 2010-11, annual revenues from IT-BPO sector is estimated to have grown over $54.33 billion compared to China with $35.76 billion and Philippines with $8.85 billion.• It is expected to touch at US$225 billion by 2020.• The most prominent IT hub are Bangalore and Hyderabad. • The other emerging destinations are Chennai, Coimbatore, Kolkata, Trivandrum, Pune, Mumbai, Ahmedabad, NCR.

IT sector is attracting considerable interest not only as a vast market but also as potential production base by international companies.

93547.9 mil $

And the strong production base has boosted the exports of computer hardware as well as software:

58810.5 mil $

The rapid growth in the sector is a consequence of access to trained English speaking professionals, cost competitiveness and quality telecommunications infrastructure.

Companies operating from India are able to leverage the advantage of the Indian time zone to offer 24 x 7 services to their global customers.

Several world leaders including General Electric, British Airways,American Express, and Citibank, have outsourced call centre operations to India.

Therefore India is considered as a pioneer in softwaredevelopment and a favourite destination for IT-enabled services.

53656.4 mil $

Increasing Potential of Indian IT Sector

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56648.5

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Regulatory Regime and Laws relating to the IT sector:

1.Department of Information Technology (DIT):

This department which is under the Ministry of Communications and InformationTechnology is responsible for the formulation, implementation and review ofnational policies in the field of Information Technology including hardware andsoftware, standardization of procedures, internet, e-commerce and informationtechnology education and development of electronics.

2. National Association of Software and Services Company (NASSCOM):

NASSCOM acts as an advisor, consultant and coordinating body for the IT-BPOindustry in India, and has played a key role in enabling the government in India todevelop industry friendly policies. NASSCOM was set up in 1988 to facilitatebusiness and trade in software and services and to encourage advancement ofresearch in software technology. It is a not-for-profit organization, registeredunder the Indian Societies Act, 1860..

3. Information Technology Act, 2000:The legal enactment which governs the process and dissemination of informationdigitally in India is the Information Technology Act, 2000.

The Indian Information Technology Act addresses the following issues:

· Legal Recognition of Electronic Documents;· Legal Recognition of Digital Signatures;· Offenses and Contraventions;· Justice Dispensation System for Cyber crimes.

Government Initiatives

1.Provisions undertaken Under Foreign Trade Policy

• In general, all Electronics and IT products are freely importable, with the exception of some defense related items.

•All Electronics and IT products, in general, are freely exportable, with the exception of a small negative list which includes items such as high power microwave tubes, high end super computer and data processing security equipment.

•Second hand capital goods are freely importable.

•Zero duty Export Promotion Capital Goods scheme (EPCG) which allows import of capital goods at zero% customs duty is available to exporters of electronic products.

•Special Economic Zones (SEZs) are being set up to enable hassle free manufacturing and trading for export purposes.

• The import of second hand computers including personal computers/ laptops and refurbished/reconditioned spares are restricted for import.

• However, second hand computers, laptops and computer peripherals including printer, plotter, scanner, monitor, keyboard and storage units can be imported freely as donations by the following category of donees, subject to the condition that the goods shall not be used for any commercial purpose and are non-transferable:

•Schools run by Central or State Government or a local body•Educational Institution running on non-commercial basis by any organization•Registered Charitable Hospital•Public Library•Public funded Research and Development Establishment•Community Information Centre run by the Central or State Government or local bodies•Adult Education Centre run by Central or State Government or a local body•Organization of the Central or State Government or a Union Territory

2. Industry Promotion Activities

• Infrastructure Support

Inadequate infrastructure has been identified as one of the constraining factors being faced by the Electronics Hardware manufacturing sector. In order to address the same, the Department has notified the Policy Resolution for setting up of Information Technology Investment Regions (ITIRs)* in the Gazette of India dated 28.5.2008.

• R&D Promotion

Major highlights include promoting Startups focussed on technology and innovation, a weighted deduction of 150% of expenditure incurred on in-house R&D is also available under the Income Tax Ac. In addition to the existing scheme for funding R&D projects, the department has put in place the 2 key schemes. Support International Patent Protection in Electronics & IT (SIP-EIT), Multiplier Grants Scheme (MGS),

Tax Incentives

Over the years, the Government has been taking steps to bring down the total taxation level on electronics Hardware. The general rate of excise duty (CENVAT) has been reduced to 8% and Central Sales Tax (CST) has been reduced from 3% to 2%. VAT on IT products is @4%.

Export Promotion Capital Goods (EPCG) SchemeThe concessional 3% duty EPCG Scheme allows import of capital goods for pre-production, production and post-production at 3% customs duty, subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 8 years reckoned from Authorization issue-date.The capital goods shall include spares (including refurbished/reconditioned spares), tools, jigs, fixtures, dies and moulds. Second hand capital goods, without any restriction on age, may also be imported under the EPCG Scheme.

Duty Exemption and Remission Schemes

Duty exemption schemes enable duty free import of inputs required for export production. Duty exemption schemes consist of:

• Advance Authorisation scheme•Duty Free Import Authorisation (DFIA) scheme

A Duty Remission Scheme enables post export replenishment / remission of duty on inputsused in export product. Duty Remission Schemes consist of :

•Duty Entitlement Passbook (DEPB) Scheme•Duty Drawback (DBK) Scheme

Special Economic Zones (SEZ) SchemeAs per the “Special Economic Zones Rules, 2006”, notified by the Department of Commerce, in case a SEZ is proposed to be set up exclusively for electronics hardware and software, including information technology enabled services, the area shall be ten hectares or more with a minimum built up processing area of one lakh square meters.

3. Software Technology Parks (STPs)

The services rendered by STPI for the Software exporting community have been statutory services, data communications servers, incubation facilities, training and value added services. Today the exports made by STPI registered unit during 2008-09 are INR 215571 Crores about 90% of total software exports from the Country.

Benefits under STP Scheme

• Customs Duty Exemption in full on imports.• Central Excise Duty Exemption in full on indigenous procurement.• All relevant equipment / goods including second hand equipment can be imported (except prohibited items).• Equipment can also be imported on loan basis/lease.• Sales in the DTA up to 50% of the FOB value of exports permissible.• Use of computer imported for training permissible subject to certain conditions.• Depreciation on computers at accelerated rates up to 100% over 5 years is permissible.• Computers can be donated after two years of use to recognized non-commercial Educational Institutions/Hospitals without payment of duty.

Quality Standards• TL 9000 is the Telecom Quality Management and Measurement System

Standard, an interpretation developed by the telecom consortium, QuEST Forum. The current version is 5.0; unlike ISO 9001 or other sector standards, TL 9000 includes standardized product measurements that can be benchmarked. In 1998 QuEST Forum developed the TL 9000 Quality Management System to meet the supply chain quality requirements of the worldwide telecommunications industry.

• ISO/IEC 90003:2004 provides guidelines for the application of ISO 9001:2000 to computer software

Quality Standards• ISO/IEC 25000n — Quality Management Division addresses software

product quality requirements specification, measurement and evaluation, and is separate and distinct from the "Quality Management" of processes, which is defined in the ISO 9000 family of standards

• Based on these models, the software structural quality characteristics have been clearly defined by the Consortium for IT Software Quality (CISQ), an independent organization founded by the Software Engineering Institute (SEI) and the Object Management Group (OMG)

Quality Standards• ISO/IEC 9126 Software engineering — Product quality is an international

standard for the evaluation of software quality. The fundamental objective of this standard is to address some of the well known human biases that can adversely affect the delivery and perception of a software development project. These biases include changing priorities after the start of a project or not having any clear definitions of "success“

The standard is divided into four parts:• quality model• external metrics• internal metrics• quality in use metrics.

• FDI IN IT SECTOR INCREASED BY A RECORD 700% IN THREE YEARS: KAMAL NATH

NEWS Article Relating To Information Technology

• In the next few years, the industry is all set to witness some multi-million dollar agreements namely:

1. A 5 year agreement between HCL Technologies and News Corp for administering its information centers and IT services in UK. As per the industry analysts, the pact is estimated to be in the range of US$ 200-US$ 250 million.

2. US$ 50 million agreement between HCL Technologies and Meggitt, UK-based security apparatus manufacturer, for offering engineering facilities.

3. Global giant Walmart has short listed there Indian IT dealers namely Cognizant Technology Solutions, UST Global and Infosys Technologies for a contract worth US$ 600 million.

Conclusion

There is a legacy vision derived from export-success of India’s software that has given rise to optimism regarding India’s growing pre-eminence in global IT canvas. Such a vision builds on a much larger vision of all round development of IT that pervades wide cross-section of Indian economy and society. Deeper analysis shows that there is need for a comprehensive IT development strategy to ensure India’s durable presence in the global software market.

“Enclave” type development of software with exclusive focus on export cannot bring about desired benefits if such a strategy ignores the linkages between export and the domestic market. Vision 2020, therefore, is a much larger vision.