PESET analysis (political

aspect)
Indian IT Industry
The changing face of India:
1977
“while the second most populous nation in the world was a
democracy…….. ........ ……When India ceased to be a democracy, our
actual interest just plummeted. I mean, what does it export but
communicable diseases?”
-Daniel Patrick Moynihan (ex-US
ambassador)
2003
“I have been Bangalored.”
-seen sported on the t-shirts of technology workers in
Silicon valley.
2005
“we came to India for the costs, we stayed for the quality
,and we are now investing for the innovation.”
-Dantem Schienman, senior vice-president, CISCO
systems.
An introduction….
World has changed its viewpoint
towards India. Our staggering growth
rate has left them spellbound. We can
clearly see that the IT industry has
been the main catalyst of our growth
story. our study recognizes that
emergence of a strong Indian IT
industry happened due to concerted
efforts on the part of the Government.
The phases of growth:
1.pre-1984

2.1985-91

3.1992-99

4.2000- present
How it went……..
What made India an IT
superpower?

1.political factors
2.economic factors
3.social factors
4.ecological factors
5.technological factors
Political environment
rules…..
 Indian political system

 being the largest democracy in the

world, India offers a multi party
system. Indians enjoy the opportunity
of selecting their representatives from
a wide number of contestants from
various political parties, the major
being INC, BJP, CPI,CPI(M),DMK, ADMK,
RJD,JD(U) etc
Advantage for the IT industry
 A multi party system offers a wide
range of choice for the voters.

 Thus a tough competition is observed

among the political parties.

 They try to outshine each other with

their lucrative manifestations, offering
a lot for the industrial development.
Regulatory policies & legal
aspects
1. Pre-1984

• DOE( Department Of Electronics) was

formed in 1972 to encourage exports.

• Software Export Scheme,1972 :

permitted the imports of hardware
development on the condition that the
price of hardware was recouped through
foreign exchange earnings within 5 years.
 Liberalization of policies related
to software industry,1976:
hardware import duties reduced from
100% to 40%
faster clearance of software export
applications.
NRIs were allowed to import software
for purposes of export.
 Departure of IBM in protest
against
FERA rules which required it to
dilute
its equity holdings to 40% in
1977.

govt attempts at building nuclear

and
space capabilities fuelled the
 software export
policy,1981
- import duty on hardware raised to
encourage use of indigenous computers.
-firms allowed to import hardware to
write software for both domestic and
export purposes.

While FERA regulations kept foreign

competition out, MRTP regulations
prevented large business houses from
entering the lucrative hardware
manufacturing until 1985.
 1985-91
New Computer Policy,1984
import duties on hardware reduced
to 60%.
income tax exemption on net exports
earning
reduced to 50%.

software technology parks of

India,1988
established to encourage and support
small
software exporters, by giving 100%
export
oriented firm a tax- free status for 5
years
 1991-99
New Economic Policy, 1991
- devaluation and partial convertibility
of rupee gave an enormous boost to
the IT industry.

- IT boom was further fuelled by the

economic liberalization, which gave

enormous opportunities to the Indian
firms to get global as well as opened the
doors for foreign companies.
 A state of “educational
emergency”
declared by govt in 1998-99
and 3
new IIITs were setup.
-In 1998, the BJP government
formed the PM’s IT task force
.
-In 1999 IT ministry was
formed .
Growth of IT industry(1998-
04)
200 large and medium IT
28.9 companies

More than 1500 small ones.

19 20
18

11.36

7.2 15 out of world total of 21

2.7
SEI CMM level 5 companies.
1998 1999 2000 2001 2002 2003 2004

Above 150 companies having

ISO 9001 cert.
 2007 and beyond……
“India’s IT success story is
legendry,
having grown from a $60m
industry
in 1991 to $43bn in 2007”
-The
Economist
11th five-year plan
Future trends as per 11th plan
 with mobile industry reading itself to roll
3G, the mobile phone will become the
access as was the computing device.
This will lead to a significant increase in
population with internet access.
 Further, the import bill to meet the demand
may well surpass the earnings through
software exports. Should measures be
adopted to convert the opportunity into
domestic IT manufacturing, India may well
emerge as a strong manufacturing
country.
 With recent changes in the excise duty
structure, companies such as HP, Dell,
ACER and Lenovo are expanding their
existing capacities and/or setting up
new plants as well.

 SEZs are emerging as the most

preferred vehicles for driving
manufacturing investments.
 E-governance being adopted in more
and more states, will revitalize IT
industry.

According to a NASSCOM-McKinsey
report, annual revenue projections for
India’s IT industry in 2008 are US $ 87
billion.
 IT industry will attract Foreign Direct
BARRIERS:
 MAT extension to the IT industry would
mean big erosion in profitability of the
company.
 Increase in education cess from 2% to
3% would prove to be an additional
burden to the IT industry.
 Inclusion of ESOPs in FBT – Ideally, this
measure should follow international
norm of ‘withholding tax’ .
SOURCES:
 “The rise of India by “Niranjan
Rajadhyaksha
 “From underdogs to tigers” by Ashish
Arora
 http://www.cerna.ensmp.fr
 11th five year plan
 www.swedishtrade.se
 http://mpra.ub.uni-muenchen.de/
 http://www.nasscom.in/
 http://www.mit.gov.in/default.aspx/
ladybird12342002@gmail.com