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Opinion » Columns » Chandrasekhar
July 14, 2013

The forgotten software boom
34% Off Books at Indigo - Summer Book Savings at Chapters Indigo. Free Shipping over $25! Ads by Google C. P. Chandrasekhar Share · Comment (5) · print · T+

The recently released results of the survey relating to 2011-12 indicates that over the five-year period since 2007-08.3 per cent in 2008-09 and 2009-10. the pace has been lethargic (Chart 1). After recording relatively low rates of growth of 4. the industry appeared to be recovering its past momentum. Even this performance may be an exaggeration. . the National Association of Software and Service Companies (NASSCOM) reportedly includes the software exports of the overseas subsidiaries of Indian companies in its figures on India’s software export earnings. though exports of both computer-related services and overall software services have increased.6 and 6. The resulting NASSCOM figure is used by the RBI as the controlling total when reporting software services exports in its overall balance of payments (BoP) statistics. Indian software firms have established overseas subsidiaries to deliver their services and execute contracts. TOPICS economy (general) Economy Watch (column) India’s software and information technology-enabled services (ITeS) exports have lost momentum. But the growth rate has slumped again to 9 per cent in 2011-12. As part of their evolution. Since 2007-08 the Reserve Bank of India has been conducting an annual survey of exports of computer software and information technology services. with the rate touching 23 per cent in 2011-12. To take account of this.

for example. helped cover as much as 54 per cent of India’s merchandise trade deficit or excess of goods imports over goods exports. especially in the US. ITeS.To make the BoP and annual export survey figures comparable. Free Shipping over $25! Chapters. only to decline thereafter to a low of 7. in the industry’s heyday performance was even better. This is an advantage since the NASSCOM figures are available for a longer time period. Even allowing for the amplifying effect on growth rates that the low base of the 1990s would have had.4 per cent in 2009-10. economic slowdown More In: Chandrasekhar | Columns | Business | Economy | Opinion | Economy Watch 7 Ads by Google 34% Off Books at Indigo Summer Book Savings at Chapters Indigo. while software exports stagnate. the Indian IT industry is still experiencing the effects of the crisis. the NASSCOM figure that is used in the balance of payments statistics. there has been little fuss or alarm about the recent tend. this record makes the recent performance extremely poor. Hence. The US. Canada and UK together account for more than three-fourths of those exports. India’s software boom seems almost a forgotten story. It has since fluctuated in the 6-12 per cent range. though not exactly equal to. Interestingly. the annual rate of growth of “software services exports” rose from 19 to 38 per cent between 2001-02 and 2004-05. If India’s export performance in software and ITeS is measured using the NASSCOM-BoP figures. If we take the year 2012-13.Indigo. the RBI adds on the exports of the overseas subsidiaries of Indian companies to its estimate of the exports of domestic firms. This total is close to. India’s overall balance of payments and the rupee can be damaging. Keywords: IT industry. During the period 1990-91 to 2005-06. As a result. This loss of software and ITeS export momentum at a time when India’s current account deficit is wide. the prognosis is not good. provisional figures suggest that net invisible receipts (from services. especially in those countries that supported India’s IT-exports boom. principal among the factors limiting the exports of software and IT-enabled services is India’s dependence on a few developed English-speaking markets. net software export earnings amounted to as much as 60 per cent. is of much significance. remittances and income from abroad). In fact. It could be even worse for India’s vulnerable balance of payments situation. Of these invisibles. The evidence is clearly one of a drastic slowdown. exports had been growing at 46 per cent per annum or doubling every 19 months. the ratio of IT services exports to merchandise exports had risen to an estimated 20 per cent in 2004-05. Needless to . Global growth is likely to take long to fully recover. As Chart 2 shows. With developed-country GDP growth still sluggish. That is bad for the IT industry. if the merchandise trade deficit remains high and rises. Given the state of countries in Europe. leading to a weakening of the rupee and uncertainty about the stability of capital flows. NASSCOM. That does mean that the return to the software boom of the late 1990s and the early 200os is unlikely. the slow down in export growth is even sharper. the impact on the current account deficit.

2013 at 20:31 IST In fact. we will continue to see lower growth rates and stiff competition from other low cost countries. When it comes to ITeS. from: Suvojit Dutta Posted on: Jul 14. It seems to be over-dependent on the lower labour cost factor. But ultimately it has been around for more than two decades and should have grown out of the dependency on Government tax doles. Learn from China on how to set up mass manufacturing capability and use to to export to other countries. Countries who require to keep their customers satisfied (somewhat) transfer their basic work to India & decision making is held by their company in their place. The other sad aspect is that the bigger companies seem to be eating into each other's pie rather than try to expand the market. Some 1 or 2 company's provide the best services whereas majority dont practice the core programming area. UK & others have found Philippines as cheaper than India so they have gone there. Now India has to grow in production & not processing. Now countries such as US. from: Shivram Posted on: Jul 14. Unfortunately. We do not seem to be creating enough new things. service sector and transport. 2013 at 12:25 IST Improving India's manufacturing capability is the long term solution to India's troubling BOP and CAD situation. instead we seem to be satisfied to be parasites on what others have created. India provides only teleprocess & not decision making. Manufacturing would also produce the factory jobs that are so urgently needed for the burgeoning youth population of the country. This is the main reason for the decrease in forex from IT sector. from: Shankar Posted on: Jul 15. there never was a boom in Software. software . We speak exports performance in terms of rupees and sometimes in dollars.Comments(5) Recommended Post a comment In the context of BOP we have to agree that IT has lost its boom due to its lack of quality. Due to change in the government in May 2004 and its policy paralysis. 2013 at 21:41 IST The software industry has no doubt created large number of jobs directly and positive spin-offs indirectly for other industries such as real estate. India is a self reliant country which can produce & reproduce the same within our nation. This means India is just to pacify the customers by talking to them which is very easy & cost is very cheap. Deficit is due to the decline of production. Until and unless it moves out of its comfort zone and moves up the value chain.

r.It's a big flop. except in few places. SEZ 2005 Act was passed. p.industry was compelled to pay MAT starting from 15% in 2007-08 and ended with 18. Employment generation in software is bleak. 2013 at 14:38 IST Columnists Listing c.A.50% during 2010-11. We lost edge in hardware also. SMEs can not move into SEZs due to reasons more than one. from: Eshwar Posted on: Jul 14. One would have loved to see an integrated scheme on software and hardware instead of SEZs. 2013 at 20:25 IST The software industry desperately needs the Government's support but it got nothing. narasimhan c. subramanian vasundhara chauhan Ads by Google .Pramod Posted on: Jul 14. from: L. That’s how government of the day diluted STPI/100% EOU schemes and eliminated tax breaks on exports with a sunset clause date 31st March 2011 without scrapping the STP scheme. Scrapping of the STPI scheme was an example of the Government's indifference which significantly hurt SME software businesses. chandrasekhar harsh mander l. Moreover 90% of the software units have been providing “services” and not developed “product”(s) of their own there by earning a label cyber coolies. l. The government did not understand that ideas and innovations trickle from SMEs.

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