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CHAPTER III

PROFILE OF IT INDUSTRY IN INDIA

3.1 INTRODUCTION

Information Technology has marked a turning point in the history of global trade

and services. With ever-increasing availability of international bandwidth and powerful

workflow management software, it is now possible to disaggregate any business process,

execute the sub-processes in multiple locations around the world, and resemble it, in

near-real time, at another location. This is driving the fundamental changes in the global

IT services landscape. The vendors and customers are redefining the levels of value

creation in the industry. IT also makes significant contribution in increasing productivity

in various sectors of the economy. Indeed, the phenomenal growth of the Indian IT

Software and Services and IT-enabled Services-Business Process Outsourcing

(ITES-BPO) sector has had a perceptible multiplier effect on the Indian economy as a

whole. In addition to the direct positive impact on the national income and employment

generation, it has triggered a rise in direct-tax collections and propelled an increase in

consumer spending, significantly higher disposable incomes. Today, India has found its

niche in the IT world and is regarded as the premier destination for the global sourcing of

IT and IT-enabled Services (ITeS). ITeS like Medical Transcription, Call Centers, Data

Processing, Back-Office Operations, GIS, Revenue Accounting, etc., are considered as

niche areas of the country and the IT industry is now getting involved in providing

end-to-end business solutions, system integration, remote management, etc.

The Indian IT industry has a prominent global presence today and has emerged as

the fastest growing segment of the Indian industry both in terms of production and

exports. Information technology industry in India is one of the fastest growing industries.

Indian IT sector has built up valuable brand equity for itself in the global markets. IT has

a major role in strengthening the economic and technical foundations in India. The sector

can be classified into 4 broad categories- IT services, Engineering services, ITES-BPO

services, E business.

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The origin of IT sector can be traced to 1974, when mainframe manufacture,

Burroughs, asked its India’s sales agent, Tata Consultancy services to export

programmers for installing system software for a U.S. client. The IT industry originated

under unfavorable conditions. Local markets were absent and government policy towards

private enterprises was hostile.

During that time Indian economy was state-controlled and the state remained

hostile to software industry through the 1970’s Government policy towards IT sector

changed when Rajiv Gandhi became the Prime Minister in 1984. His new computer

policy consisted of recognition of software exports as a delicensed industry”, permission

of foreign firms to set up wholly owned, export- dedicated units and a project to set up a

chain of Software Park that would offer infrastructure below market costs. These polices

laid the foundation for the development of a world class IT industry in India. The profile

of the industry has changed considerably since then. Today, Indian IT companies such as

TCS, Wipro, Infosys, and HCL etc. are renowned in the global markets for their IT

prowess. Some of the major factors which played a key role in India’s appearance as key

global IT players include escalating number of skilled professionals in IT, vast academic

infrastructure of India. India has second leading English speaking work force in the

world. The cost of software development and other services in India is very competitive

as compared to west. Indian IT industry has also gained enormously from the availability

of a robust infrastructure (telecom, power and roads) in the country. Incentives such as

income tax holiday until 2010 have been provided for the export of IT enabled services.

Over the past decade, information technology industry has become one of the

fastest growing industries in India. Strong demand over the past few years has placed IT

markets in the Asia Pacific region. The Indian software and IT enabled services industry

has grown at a compound annual growth rate of 28 percent during the last five years.

The contribution of IT and IT enabled services to national GDP is 7.7 percent in 2008-09

against 1.9 percent in 2000. The Government of India projects an export of US $ 50 billion

by the year 2008 for the Indian software industry.


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Along with the growth opportunities, IT sector is one of the highest paying

sectors. The average augment in salary in IT sector across the levels was around

16 percent. The recruitment of engineers and IT professionals in their industry is growing

at the compound annual rate of 14.5 percent approximately. According to National

Association of software and services Company (NASSCOM), the Indian IT software and

services sector grew by 31.4 percent during 2005-06, notching up aggregate revenues of

US$ 29.6 billion, up from US $22.5 billion in 2004-05. Encouraged by the 2005-2006

performance, the IT and ITES sector is confident of achieving the US $60 billion in

exports by 2010. Thus, it is evident that the information technology sector in India has

grown by leaps and bounds since the last five years. Consequently the financial

performance of IT sector has surged in terms of revenue, profitability and shareholders’

wealth maximization. India is ahead of competitors such as Singapore, Hong Kong,

China, Philippines, Mexico, Ireland, Australia and Holland, among others.

3.2 SCOPE OF IT INDUSTRY IN INDIA

The IT industry has great scope for people as it provides employment to technical

and non-technical graduates and has the capability to generate huge foreign exchange

inflow for India. India exports software and services to approximately 95 countries in the

world. By outsourcing India, many countries get benefits in terms of labour costs and

business processes. Also, the Indian companies are broadening the range of services

being provided to the customers, which is resulting in more off-shoring. Talent

acquisition, development and retention initiatives taken by the companies have brought

down the employee attrition rates, thereby providing more stability to the employees and

increasing their job commitment.


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SWOT ANALYSIS OF IT INDUSTRY IN INDIA

Strengths Weaknesses

• 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.

• Following Quality Standards such as

ISO 9000, SEI CMM etc.

• English-speaking professionals

• Cost competitiveness

• Quality telecommunications

infrastructure

• Indian time zone (24 x 7 services to the

global customers).Time difference

between India and America is

approximately 12 hours, which is

beneficial for outsourcing of work

• Absence of practical knowledge

• Dearth of suitable candidates

• Less Research and Development

• Contribution of IT sector to India’s

GDP is still rather small.

• Employee salaries in IT sector are

increasing tremendously. Low wage

benefit will soon come to an end.

Opportunities Threats

• High quality IT education market

• Increasing number of working age people

• India's well developed soft infrastructure

• Upcoming International Players in the

market

• Lack of data security systems

• Countries like China and Philippines with

qualified workforce making efforts to

overcome the English language barrier.

• IT development concentrated in a few

cities only


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3.4 CONTRIBUTION OF IT INDUSTRY TO INDIAN ECONOMY

The contribution of India's IT industry to economic progress has been quite significant.

The rapidly expanding socio-economic infrastructure has proved to be of great use in

supporting the growth of Indian IT industry. The flourishing Indian economy has helped the IT

sector to maintain its competitiveness in the global market. The IT and IT enabled services

industry in India has recorded a growth rate of 22.4% in the last fiscal year. The total revenue

from this sector was valued at 2.46 trillion Indian rupees in the fiscal year 2007. Out of this

figure, the domestic IT market in India accounted for 900 billion rupees. So, the IT sector in

India has played a major role in drawing foreign funds into the domestic market.

Direct contribution to the Indian economy

In the last two decades, the Indian IT/ITES industry has contributed significantly

to Indian economic growth in terms of GDP, foreign exchange earnings and employment

generation. However, equally significant, though not as tangible has been the ripple effect

it has created on the general economic environment in the national and international

economic space. The industry has been the trigger for many “firsts” and has contributed

not only to unleashing the hitherto untapped entrepreneurial potential of the middle class

Indian but also taking Indian excellence to the global market.

The current and evolving role of IT/ITES industry in India’s economy is well

established. The sector is proving to be the major growth pole within the services sector,

which in turn drives several economic indicators of growth in the country. A few key

indicators of direct contribution are:

1. Growing share of the country’s GDP

The sector’s contribution to the country’s GDP has been steadily increasing from

a share of 1.2 percent in Financial Year 1998 to 7.752 percent in Financial Year 2009.

The production of Electronics and Computer Software / Services valued at Rs. 379754

crore (US$ 82573 million) accounts for a share of 7.70 percent in India’s GDP at current

prices during 2008-09. This is slightly higher than the share of this sector in India’s GDP

in 2007-08 at 7.64 percent. The share of Electronics and Computer Software / Services

Industry in India’s GDP is continuously increasing as it can be seen from the table below.


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TABLE 3.1

THE SHARE OF ELECTRONICS AND COMPUTER SOFTWARE / SERVICES INDUSTRY IN INDIA’S GDP

Year Share of GDP (%)

1997-98 1.20

1998-99 1.50

1999-00 1.90

2000-01 2.70

2001-02 2.90

2002-03 3.20

2003-04 3.50

2004-05 4.10

2005-06 4.80

2006-07 6.30

2007-08 7.60

2008-09 7.70

Source: Electronics and Computer Software Industry

FIGURE 3.1

THE SHARE OF ELECTRONICS AND COMPUTER SOFTWARE INDUSTRY IN INDIA’S GDP

Share of Electronics and Computer Software industry in

India‘s GDP

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Year

Share of GDP

Percetage


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2. Boosting the foreign exchange reserve of the country

India’s overall export during the year 2008-09 is Rs. 1355049 crore

(US $ 294.64 billion). India’s Electronics and Computer Software/Services export valued at

Rs. 259060 Crore (US$ 56.33 billion) accounts for a share of 19.12 percent in India’s

overall export during the year 2008-09. Export earnings in the Financial Year 2008 stood

at USD 40.0 billion with a growth of 36 percent.

TABLE 3.2

SHARE OF ELECTRONICS AND COMPUTER SOFTWARE INDUSTRY IN

INDIA’S TOTAL EXPORT

Year Share of IT export (%)

1997-98 5.63

1998-99 7.47

1999-00 8.92

2000-01 10.95

2001-02 13.43

2002-03 13.94

2003-04 16.1

2004-05 14.52

2005-06 14.33

2006-07 16.49

2007-08 17.01

2008-09 19.12


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FIGURE 3.2

SHARE OF ELECTRONICS AND COMPUTER SOFTWARE INDUSTRY IN

INDIA’S TOTAL EXPORT

SHARE OF ELECTRONICS AND COMPUTER SOFTWARE

INDUSTRY IN INDIA’S TOTAL EXPORT

0

5

10

15

20

25

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

YEARS

IN P

ER

CEN

TA

GE

% to tot export

3. Employment generation

The total IT Software and Services employment is 2.21million in 2008-09, as

compared to 0.52 million in 2001-02. This represents a net addition of 1.68 million to the

industry employee base since 2001-02. The indirect employment attributed by the sector

is 8.0 million in 2008-09. This translates to the creation of about 10.20 million job

opportunities attributed to the growth of this sector.

IT-ITeS Exports constitute the major source of employment for employment in

this industry and its share has increased over the years. The share of IT-ITeS Exports

segment in total employment of the IT Software & Services Industry has grown from

52.9% in 2001-02 to 77.6% in 2008-09 whereas the share of domestic market in total

employment of the IT Software & Services Industry has declined from 47.1% in 2001-02

to 22.6% in 2008-09. Direct employment in the sector is 2.21 million by the end of the

Financial Year 2009 at AGR of 26% in the last decade, making it the largest employer in

the organized private sector of the country.


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TABLE 3.3

EMPLOYMENT OF THE IT SOFTWARE & SERVICES INDUSTRY

In Millions

Year IT Services & Exports

BPO Exports Domestic Market

Total Employment

1999-00 0.11 0.4 0.13 0.28

2000-01 0.16 0.7 0.2 0.43

2001-02 0.17 0.11 0.25 0.52

2002-03 0.21 0.18 0.29 0.67

2003-04 0.3 0.22 0.32 0.83

2004-05 0.39 0.32 0.35 1.06

2005-06 0.51 0.42 0.38 1.29

2006-07 0.69 0.7 0.45 1.62

2007-08 0.86 0.7 0.45 2.01

2008-09 0.92 0.79 0.5 2.21

Indirect contribution to the Indian economy

The growth of the IT/ITES sector and its resultant contribution to the economic

growth and development has also resulted in certain wider impacts, which in many cases

have had a rub-off effect and set benchmarks for other sectors of the economy while

boosting the image of India in the global market.

1. Additional employment generation

The indirect employment generated, at the rate of 4 additional jobs created in the

economy for every one job created in the sector, is even more socially relevant as nearly

75 percent of the workforce employed in those additional jobs are SSC/HSC or less

educated.


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2. Driving growth of other sectors of the economy

Apart from contributing to the growing income of its direct stakeholders

(promoters, shareholders and employees), the IT/ITES industry has had a multiplier

effect on other sectors of the economy with an output multiplier of almost 2 through its

non-wage operating expenses, capital expenditure and consumption spending by

professionals.

3. Encouraging balanced regional development

By gradually spreading their business operations to smaller Tier II/III cities, the

IT sector (besides generating revenue and employment) is also assisting in improving the

supply of talent pool and development of physical and social infrastructure, either

directly by themselves or by spurring the Government to action.

4. Fuelling the growth of Private Equity /venture capital funding

The worldwide dot com boom and the growth in the IT sector kick-started VC

activity in India which led to the creation of first generation of centric VC funds. Other

sectors, such as healthcare, manufacturing and financial services have also benefited from

this phenomenon as these sectors are now also being able to access this source of

funding. While IT/ITES continues to be the favourite sector with the largest share (28%)

of PE/VC funding.

5. Spurring first generation entrepreneurship

Corporate India consisted of either large family owned businesses or

multinational companies till the advent of the IT/ITES industry, and it was rare to see a

first generation entrepreneur. The shift of focus from physical capital to intellectual

capital and the advent of the PE/VC funding enabled a large number of first generation

entrepreneurs with no wealth to try their hand at starting new enterprises.

The demonstrated success of these entrepreneurs created an aspiration among the middle

class and spurred them to exploit their potential with confidence. As per information

available with Software Technology Parks of India (STPI), 1,905 new units were

registered during the period financial year 2001 to financial year 2005, most of which are

likely to be set up by first generation entrepreneurs. While many first-generation


66

entrepreneurs became billionaires in the process, the wealth created was not restricted

among the founders alone. The practice of Employee Stock Option Plan (ESOP), first

started by the IT/ITES industry before it was adopted by many other industries as well,

shared this wealth among employees as well thereby creating many salaried millionaires.

6. Improving the product/service quality level

The fact that IT/ITES companies cater to and compete with global players has led

to their adopting the highest quality standards. This high quality of services and products

have been the driver and sustainer of growth which has helped move India out of the

“mediocrity”, low quality image and has in fact raised the bar for other industries as well.

Indian exports had traditionally been restricted to low end, low-technology oriented

products like gems and jewelleries and garments/apparels. It is with the advent of

IT/ITES industry that the world began to recognize that Indian products and services

could also compete and win against global competitors on quality parameters. India is

now also emerging as a research and development centre for some of the large IT/ITES

companies in the world, once again demonstrating that India now stands for quality.

30 percent of companies worldwide who have reached Level 5 of Capability Maturity

Model Integration (CMMI) are Indian IT/ITES firms. Nearly 75 percent of Fortune 500

and 50 percent of Global2000 corporations source their technology-related services from

India with an increasing number of MNCs outlining their investment plans for setting up

R&D operations in India.

7. Front runner in practicing good corporate governance

The industry has been a front runner in practicing good corporate governance and

their commitment to infuse it in their business activities have led to creating a positive

pressure within the industry, as well as in other industries, with more and more

companies adopting global standards in corporate governance practices. The major

IT/ITES companies in India have in recent times received national and international

recognition for their corporate governance initiatives.


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8. Boosting the image of India in the global market

Widely traveled Indians have watched with pride as different countries and people look

at India and Indians with hitherto unknown respect and admiration. The India IT/ITES industry

has contributed to what brand ‘India’ stands for in today’s global market. While India has been

witnessing an acquisition spree of overseas companies in recent years, the IT/ITES sector has

led this phenomenon with the highest share (23%) of outbound M&A deals in 2006.

Listing of Indian IT/ITES companies in global stock exchanges, which requires

adherence to stringent global accounting norms, has helped build a strong brand of the

companies and the sector outside India.

Made in India software products have found widespread use across the world while

several Indian IT/ITES firms have been partnering with high profile global brands and events.

3.5 PRODUCTION AND EXPORT OF SOFTWARE AND HARDWARE

The table shows the production and export domestic value of computer software

and hardware sectors from 1999-00 to 2009-10.

TABLE 3.4

PRODUCTION AND EXPORT OF SOFTWARE AND HARDWARE SECTOR

Software Hardware Year

Production Export Domestic Production Export Domestic

1999-00 24350 17150 7200 28100 1400 26700

2000-01 37750 28350 9400 31100 4788 26312

2001-02 47374 36500 10874 32750 5900 26850

2002-03 59500 46100 13400 37500 5600 31900

2003-04 74490 58240 16250 43800 7700 36100

2004-05 101920 80180 21740 50500 5000 45500

2005-06 133700 104100 29600 56600 9625 46975

2006-07 178000 141000 37000 66000 12500 53500

2007-08 211410 164400 47010 84410 13200 71210

2008-09 275190 216300 58890 97260 31230 66030

2009-10 301280 235080 66200 109940 31250 78690


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FIGURE 3.3

PRODUCTION AND EXPORT OF SOFTWARE

0

50000

100000

150000

200000

250000

300000

350000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

YEAR

PRODUCTION AND EXPORT OF COMPUTER SOFTWARE

Production

Export

Domestic

FIGURE 3.4

PRODUCTION AND EXPORT OF HARDWARE

0

20000

4000

6000

8000

10000

12000

in crores

200

200

200

200

200

200

200

200

200

200

201

Years

Production and Export of

Hardware

Productio

Expor Domesti

in crores


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The above table shows the comparison between the software Production and

export. It is inferred that the software production is high and similarly the export of

software services also shows a high mean value. The mean value of production, export

and domestic value of software and services was Rs.131360 crores, Rs.102491 crores,

and Rs.28869 crores respectively.

In hardware production and export, production was very high but export of

hardware was very low. Majority of products or materials are sold in the domestic

market. The mean value of production export and domestic value of hardware was at

Rs. 57996 crores, Rs.11654 crores and Rs.46342 crores respectively.

To summarize, software and services have more significant variation in

production, export than production and export of hardware.

Export Segments under Electronics and Computer Software / Services Sector

Electronics and Computer Software / Services sector can be broadly segmented as below:

• Consumer electronics

• Industrial electronics

• Computer hardware

• Computer software

• Communication and broadcasting

• Electronic components.


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TABLE 3.5

ELECTRONICS AND IT EXPORTS DURING 1999-00 TO 2009-10

In Crores

The sectoral contribution of the above segments in the Electronics and Computer

Software / Services export is as shown.

The total electronic hardware exports are classified into different components and

namely, consumer electronics, industrial electronics, computer hardware, communication

and broadcasting equipments, strategic electronics, and components. The above table

shows the classification of export of electronic hardware for the period from 1999-00 to

2009-10.

Year Consumer electronics

Industrial electronics

Computer hardware

Commu &

broad Components

Total hardware

Computer software

Total

1999-00 300 200 240 50 610 1400 17150 18550

2000-01 648 500 1250 550 1840 4788 28350 33138

2001-02 700 950 1800 150 2200 5800 36500 42300

2002-03 750 1400 550 500 2400 5600 46100 51700

2003-04 825 1515 1440 165 3755 7700 58240 65940

2004-05 1150 1500 1200 350 3800 8000 80180 88180

2005-06 2000 2300 1025 500 3800 9625 104100 113725

2006-07 1500 3000 1500 650 5850 12500 141000 153500

2007-08 1600 3885 990 625 6100 13200 164400 177600

2008-09 2600 4200 1650 12280 10500 31230 216190 247420

Mean 1207 1945 1165 1582 4095 9984 89221 99205

Sd 712 1370 485 3765 2832 8265 66043 73685

Cv 59 70 42 238 69 83 74 74


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Export of consumer electronics shows an increasing trend during the study period

except 2006-07 (1500 crores only) and the mean value of consumer electronics in

hardware export was 1207 crores, Standard deviation 712 and Coefficient of variation

was 59 percentage.

The above table shows that the value of export industrial goods are increasing

except 2004-05 during the study period. The mean value of industrial goods was

Rs.1945 crores, Standard deviation of 1370 and Coefficient of variation was 70 percentage.

The value of export of computer hardware faced many ups and downs during the

study period. The mean value of computer hardware was Rs.1165 crores, Standard

deviation Rs.3765 crores and Coefficient of variation was 42 percent respectively.

Communication and broadcasting sector shows a fluctuating trend during the

study period. It is maximum in the year 2008-09 of Rs.12280 crores and minimum in the

year initial year. The mean value of communication and broadcasting sector was Rs.1582

crores, Standard deviation Rs.3765 crores and Coefficient of variation 238 percent.

Strategic electronics shows zero export except 1999-00 during the study period.

Electronic components sector shows a steady increase during the study period. The mean

value is 4085 crores, Standard deviation 2832 crores and Coefficient of variation

69 per cent respectively.

In order to compare the relative variability of the data coefficient of variation was

applied. The value of different items of electronic hardware exports and software exports

are shown on the Table 3.5.

As a result, software export is more consistent. And the coefficient of variation

was 74 percent as compared to the 83 percentage in case of export of hardware during the

period of the study.

Exports made by Software Technology Parks

There has been an impressive growth of software exports made by STP registered

units in the year under review, considering the global recession. The exports grew from

Rs 180155.31 crores in 2007-08 to Rs 207357.92 crores in 2008-09, with a year-on-year


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growth of 15.01 percent. The growth of Software Export registered by STP Units from

the beginning of this decade is as under

TABLE 3.6

EXPORTS MADE BY STP UNITS Rs. In crores

Year STP Exports

2000-01 20051

2001-02 29523

2002-03 37176

2003-04 51458

2004-05 74019

2005-06 100965

2006-07 144214

2007-08 180155

2008-09 207358

2009-10 205505


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Exports made by Export Hardware Technology Parks

The exports made by EHTP units grew from Rs.4377 crores in 2007-08 to

Rs 6208 crores in 2008-09, with a year-on-year growth of 41.8 percent. Export growth

registered by EHTP units in last 8 years is as under

TABLE 3.7

EXPORTS MADE BY EHTP UNITS

Rs. in Crores

Year EHTP Exports

2000-01 1239

2001-02 1502

2002-03 2206

2003-04 2121

2004-05 2174

2005-06 2950

2006-07 3446

2007-08 4377

2008-09 6208

2009-10 7974

Destinations for India’s Electronics and Computer Software / Services Export

During the year 2008-09, India exported its various commodities to 247 countries

of the world. India’s export of Electronics and Computer Software / Services during the

year 2008-09 was destined to 221 countries.


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TABLE 3.8

DESTINATIONS FOR INDIA’S IT EXPORT

Year No. of

countries

2002-03 68

2003-04 182

2004-05 201

2005-06 198

2006-07 205

2007-08 208

2008-09 221

FIGURE 3.5

DESTINATIONS FOR INDIA’S IT EXPORT

DESTINATION OF IT EXPORT–COUNTRYWISE

USA continues to be major markets for the IT exports from India compared to

other countries. However the share of USA has declined from 69.10 per cent in the

financial year 2003 to 53.09 per cent in the financial year 2009, whereas that of Europe

0

50

100

150

200

250

No. of countries

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Destinations for India' s IT Export

No. of countries


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has increased from 22.2 per cent to 31.08 per cent over the same period. Markets across

Continental Europe and the Asia Pacific are also witnessing significant year-on-year

growth. This trend towards a broader geographic market exposure is positive for the

industry, not only as de-risking measure but also as a means of accelerating growth by

tapping new markets.

TABLE 3.9

DESTINATION OF IT EXPORT –COUNTRYWISE

Year America Europe Rest of the World

2003 69.10 22.20 8.70

2004 69.40 22.60 8.00

2005 68.30 23.10 8.60

2006 67.18 25.13 7.69

2007 61.40 30.10 8.50

2008 60.0 31.0 9.0

2009 53.09 31.08 15.52

FDI in India's IT Industry

The information technology industry of India has been attracting considerable

amount of foreign direct investment in the recent years. Investments are being made in

the four principal sectors of the Indian information technology industry - online

businesses, information technology services, information technology-based services and

software merchandise. Newer investment opportunities are opening up every now and

then in the Indian information technology scenario.


76

TABLE 3.10

FDI INVESTMENT IN IT SECTOR

In crores

Year FDI in IT Total FDI inflows

to India

2004-05 2,441 17138

2005-06 6,172 24613

2006-07 11,786 70630

2007-08 5,623 98664

2008-09 7,329 123025

2009-10 4,350 123378

2010-11 1,333 19989

Cumulative from

2000-2010 (up to May ’10) 45,179 536,492

% to total inflows 9%

Foreign Direct Investment (FDI) inflows to Computer Software and Hardware

Industry is increased upto 9 percent in 2011. Software Technology Parks, regulatory

reforms by the Indian government, the growing Indian market and the availability of

skilled workforce have been important factors in boosting FDI inflows to computer

software and hardware in India.

3.6 INITIATIVES IN INFORMATION TECHNOLOGY SECTOR

OLPC-One Laptop per Child

“Its an education project, not a laptop project”- Nicholas Negroponte

(The founder and chairman of the OLPC) To create educational opportunities for the

world's poorest children by providing each child with a rugged, low-cost, low-power,

connected laptop with content and software designed for collaborative, joyful, self-


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empowered learning. When children have access to this type of tool they get engaged in

their own education. They learn, share, create, and collaborate. They become connected

to each other, to the world and to a brighter future.

It is an inclusive effort that calls on various agencies of governments,

corporations believing in Corporate Social Responsibility (CSR), foundations, NGOs,

social organizations and individuals to contribute in their own ways to help address the

pressing need to make India's children learn using the technologies of our times.

Helping our children learn with the tools of our times is the most important

investment we can make towards a better tomorrow for all and OLPC India calls on every

citizen and organization to do their bit to help all our children grow up to be worldclass

citizens.

National e-Governance Plan

The National e-Governance Plan (NeGP) aims to promote e-Governance on a

massive scale in areas of concern to the common man. The NeGP has been formulated for

taking a holistic view towards the entire e-Governance initiative across the country and for

giving a thrust to e-Governance activities across various arms of government at the national,

state and local government level. NeGP uses a programme approach, which is guided by a

common vision, strategy and approach to objectives. This approach has the added advantage

of enabling huge savings in cost, in terms of sharing the core and support infrastructure; it

enables interoperability through standards, which would result in the citizen having a

seamless view of Government. NeGP consists of 27 Mission Mode Projects (MMPs)

encompassing 9 central MMPs, 11 state MMPs and 7 integrated MMPs that span multiple

backend Ministries/ departments. It also includes 8 program support components aimed at

creating the right governance and institutional mechanisms, core infrastructure, policies and

standards and the necessary legal framework for adoption of e-Governance in the country.

It is implemented at the central, state and local government levels.


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Statewide Area Networks (SWANs)

Under NeGP, the Government had approved the Scheme for establishing State

Wide Area Networks (SWANs) across the country in 29 States/ 6 UTs at a total outlay of

Rs.3,334 crores. Under this Scheme, it is envisaged to provide secured Network from

State Headquarters up to the Block level with a minimum bandwidth capacity of 2 Mbps.

As of March 2009, 7 States/ UTs (Delhi, Haryana, Himachal Pradesh, Tamil Nadu,

Chandigarh, Tripura and Punjab) have already completed the SWAN implementation,

while implementation is at an advance stage in 12 States /UTs.

State Data Centre (SDC)

State Data Centre (SDC) has been identified as one of the important elements of

the core infrastructure for supporting e-Governance initiatives under NEGP. The Government

has approved the scheme in January 2008 at an estimated outlay of Rs. 1623.20 crores to

cover 28 States and 7 UTs across the country. SDC Proposals of 31 States/UTs have

already been approved by Department of Information Technology (DIT) with a total

outlay of Rs.1378.50 crores.

Common Service Centre

� The Common Services Centres (CSCs) are one of the three infrastructure pillars

of the National e-Governance Plan and would serve as the physical front for

delivering Government and private sector at the doorstep of the citizen.

� The Government had approved this Scheme for facilitating establishment of more

than 1,00,000 broadband Internet-enabled CSCs in rural areas of the country at a

total cost of Rs 5742 crores. As of March 2009, the number of CSCs rolled out in

20 States of India is 36,485.

e-Bhoomi : Management of Land Records

� Premier e-Governance project in India, Developed by NIC of Government of India

� One of the biggest citizen centric projects in the world

� 16 to 18 million people avail services every year

� 20 million manually managed land records digitalized


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� 6.7 million farmers with average holding of 0.6 hectare covered

e-Chaupal : Transforming Lives and Landscapes

� A pioneering web-based initiative by ITC to deliver real-time and customized

information to farmers to enhance their farm productivity and empowers rural

communities

� Started in 1990

� Currently comprises 6400 e-Chaupals

� Reaching nearly 40,000 village and serving over 4 million farmers

� Nine provinces already covered

� Targeted 20,000 e-Chaupals extending coverage to 1,00,000 village entailing

investments of US$1.15 billion in next 10 years

� Will transform lives of one-sixth of rural India

Operation Vikas: Competitiveness through IT

The National Manufacturing Competitive Council (NMCC) with an aim to

stimulate manufacturing competitiveness of small and medium enterprises (SMEs) across

the country has launched a national manufacturing portal on June19, 2007. The portal

was jointly developed by NMCC and Microsoft Corporation (India) Pvt Ltd. as a part of

`Project Vikas', which is aimed at making the Indian SME sector competitive and to help

establish `Made in India' as a global brand. The portal, www.nmcc-vikas.in or www.nmcc-

vikas.gov.in, is expected to enhance competitiveness of India's manufacturing sector through

the use of information technology. Addressing a press conference after launching the

portal, Dr V. Krishnamurthy, Chairman, NMCC said, "The portal, the first of its kind in

the country, is a major initiative to enhance the competitiveness of the manufacturing

sector especially the SMEs through information technology. The portal would enable

companies to compete more effectively in today's globalized environment and is expected

to improve productivity of most enterprises by almost 50 per cent".


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Competitive edge

"Through an ICT-based intervention model, Project Vikas will help empower the

SME sector and give it a competitive edge in the global market. The project also aims to

develop knowledge networks through the creation of research and development linkage,

capacity building with regional training institutes, sharing of best practices and enabling

linkage with the SME cluster eco-system," Dr Krishnamurthy said, while highlighting the

importance of the portal. The portal also provides knowledge base on different

manufacturing sectors and sub-sectors, resources on Indian and international clusters,

intellectual property rights (IPR) information to achieve niche competitiveness. "Market

information to improve market access, credit and finance related areas for SMEs

including various policies, schemes, Central and State Government Industrial Acts,

policies, schemes, incentives etc for the manufacturing sector; and other related useful

links will also be available on the portal," he said.

Clusters

In the first phase, textile cluster in Tirupur, pharma in Hyderabad and auto in

Pune were identified for the initiative, while the second phase would cover leather cluster

in Agra, auto in Chennai and textile in Ludhiana. NMCC aims to extend the initiative to

5-10 clusters in the next 12 months and around 25 clusters under the project in the next

four-five years. "There are a total of 380 clusters in the country and we would want to

cover all of them in a phased manner over a period of time and the platform would be

able to support 14 Indian language to ensure deeper penetration of the project in the

country,"

With the manufacturing sector contributing around 65 per cent of the country's

total exports and constituting 12-14 per cent to the GDP, the sector has tremendous

potential to create jobs and lead to further growth in the economy. "If the current growth

rate of 12-14 per cent in the sector is maintained over the next 10 years, we would be able

to corner 25 per cent share of the GDP, as against our target of 32-33 per cent," he added.


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Export Promotion Schemes

Special schemes are available for setting up Export Oriented Units for the

Electronics/IT Sector. These schemes are:

� Export Oriented Unit (EOU)

� Scheme Electronics Hardware Technology Park (EHTP)

� Scheme Software Technology Park (STP)

� Scheme Special Economic Zones (SEZ)

� Scheme Export promotion Capital Goods (EPCG)

Foreign Direct Investment Policy for Information Technology

FDI upto 100 percent is permitted for E-Commerce activities subject to the

condition that such companies would divest 26 percent of their equity in favour of the

Indian public in five years, if these companies are listed in other parts of the world.

Such companies would engage only in business to business (B2B) E-Commerce and not

in retail trading, inter alia, implying that existing restrictions on FDI in domestic trading

would be applicable to E- Commerce as well.

High-Performance/ Advanced Computing

High Performance Computing: In the strategic area of High Performance

Computing (HPC), C-DAC has developed in-house expertise for design and development

of parallel processing technology-based HPC systems, application development

environments, system software tools and utilities, as well as development and porting of

applications. C-DAC’s PARAM series of HPC systems have 60 installations worldwide.

Multiplier Grant Scheme

Department of Information Technology has initiated a scheme titled “Multiplier

Grants Scheme” to encourage collaborative R&D between industry and academics/ R&D

institutions for development of products and package. The scheme aims to strengthen

industry/ institute-linkage, encourage and accelerate development of indigenous products/

package and bridge the gap between R&D and commercialization. Under the scheme, if

industry supports R&D for development of commercialized products at an institution, the


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Government may provide financial support upto twice the amount provided by industry.

The proposals for providing financial support under the scheme are to be submitted

jointly by the industry and institutions. The total scheme outlay is Rs. 36.0 crores

including the government contribution in the form of grants-in-aid of Rs. 24.0 crores.

The duration of the scheme is 3 years.

Free/Open Source Software

A National Resource Centre for Free and Open Source Software (NRCFOSS) has

been set up in Chennai jointly with C-DAC and Anna University KBC Research Centre

with an objective to contribute to the growth of Free/Open Source software in India to

Research and Development, Human Resource Development, Networking and

Entrepreneurship development as well as to serve as the reference point for all FOSS

related activities in the country. NRCFOSS has developed the portal www.nrcfoss.org.in

using open source content management tool and reflects FOSS events in the country.

The Centre has come out with Indian GNU/Linux localized distribution termed as

Bharat Operating System Solutions (BOSS). BOSS Linux Desktop Edition version 3.0

with wide Indian language support and package that are relevant for use in government

domain has been released in DIT during 2008.

CREATING KNOWLEDGE ECONOMY

National Knowledge Network

National Knowledge Commission has recommended setting up of high-speed

digital broadband network with adequate capabilities and access speed to encourage

sharing of resources and collaborative research. In accordance with this recommendation,

Department of Information Technology initiated the National Knowledge Network plan

scheme with the primary objective to provide Gigabit broadband connectivity to all

institutions of higher learning and research in the country. National Knowledge Network

with scalable multi-gigabit capabilities will connect 1000 nodes covering all Universities,

Research Institutions, Libraries, Laboratories, Hospitals and Agricultural Institutions

across the country.


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This will also act as a backbone for the e-governance. By facilitating the flow of

information and knowledge, the network will address the critical issue of access, create a

new paradigm of collaboration and enrich the research efforts in the country.

Human Resource Development

HRD activities are targeted to ensure availability of trained human resources for

the manufacturing and service sectors of electronics and IT industry. Initiatives include

identifying gaps emerging from the formal sector, planning programs in non-formal and

formal sectors for meeting these gaps. In pursuance, projects have been initiated for

generation of quality manpower in the areas of Information Security and VLSI Design;

setting up of a Regional Institute for e-Learning and Information Technology (RIELIT) at

Kohima, Nagaland and at Tripura, Agartala for creating skilled manpower in the area of

Computer Science/IT. DIT is also implementing a scheme relating to Manpower

Development for Software Export Industry with a view to increasing the employability of

the students. The Scheme covers Training of the Trainer's Program, Enhancement of

quality of IT education in colleges, Virtualization of Technical Education, conducting

specialized short-term courses in IT/ITES sector, setting up of National On-line Test

System for Graduate Engineers in Information Technology, etc. This is being

implemented through nine institutions/organizations.

The Information Technology (Amendment) Act 2008

The Information Technology Act 2000, a legal framework for transactions carried

out electronically was enacted to facilitate e-Commerce, e-Governance and to take care

of computer related offences. Over the years, with several new forms of computer crime,

misuse and fraud taking place, a need was felt to strengthen legislation pertaining to

information security.


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