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PESET analysis (politicalaspect)Indian IT Industry

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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, ouractual interest just plummeted. I mean, what does it export butcommunicable diseases?

-Daniel Patrick Moynihan (ex-USambassador)

2003I have been Bangalored.

-seen sported on the t-shirts of technology workers inSilicon valley.

2005we came to India for the costs, we stayed for the quality

,and we are now investing for the innovation.

-Dantem Schienman, senior vice-president, CISCOsystems.

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An introduction.

World has changed its viewpointtowards India. Our staggering growthrate has left them spellbound. We can

clearly see that the IT industry hasbeen the main catalyst of our growthstory. our study recognizes thatemergence of a strong Indian ITindustry happened due to concertedefforts on the part of the Government.

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The phases of growth:

1.pre-1984

2.1985-91

3.1992-99

4.2000- present

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How it went..

What made India an ITsuperpower?

1.political factors2.economic factors3.social factors4.ecological factors

5.technological factors

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Political environmentrules..

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Indian political system

being the largest democracy in theworld, India offers a multi party

system. Indians enjoy the opportunityof selecting their representatives froma wide number of contestants from

various political parties, the majorbeing INC, BJP, CPI,CPI(M),DMK, ADMK,RJD,JD(U) etc

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Advantage for the IT industry

A multi party system offers a widerange of choice for the voters.

Thus a tough competition is observedamong the political parties.

They try to outshine each other withtheir lucrative manifestations, offeringa lot for the industrial development.

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Regulatory policies & legalaspects

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 theprice of hardware was recouped throughforeign exchange earnings within 5 years.

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Departure of IBM in protestagainst

FERA rules which required it to

diluteits equity holdings to 40% in

1977.

govt attempts at building nuclearand

space capabilities fuelled the

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software exportpolicy,1981

- import duty on hardware raised toencourage use of indigenous computers.

-firms allowed to import hardware towrite software for both domestic andexport purposes .

While FERA regulations kept foreigncompetition out, MRTP regulationsprevented large business houses fromentering the lucrative hardware

manufacturing until 1985.

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1985-91

New Computer Policy,1984 import duties on hardware reducedto 60%.income tax exemption on net exports

earningreduced to 50%.

software technology parks of India,1988

established to encourage and supportsmallsoftware exporters, by giving 100%

exportoriented firm a tax- free status for 5

years

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1991-99

New Economic Policy, 1991- devaluation and partial convertibilityof rupee gave an enormous boost to

the IT industry.

- IT boom was further fuelled by the

economic liberalization , which gaveenormous opportunities to the Indian

firms to get global as well as opened thedoors for foreign companies.

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Growth of IT industry(1998-04)

2.7

11.36

7.2

1819 20

28.9

1998 1999 2000 2001 2002 2003 2004

200 large and medium ITcompanies

More than 1500 small ones.

15 out of world total of 21SEI CMM level 5 companies.

Above 150 companies havingISO 9001 cert.

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2007 and beyond

Indias IT success story islegendry,

having grown from a $60m

industryin 1991 to $43bn in 2007

-The

Economist

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11 th five-year plan

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With recent changes in the excise dutystructure, companies such as HP, Dell,ACER and Lenovo are expanding their

existing capacities and/or setting upnew plants as well.

SEZs are emerging as the mostpreferred vehicles for drivingmanufacturing investments.

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E-governance being adopted in moreand more states, will revitalize IT

industry.

According to a NASSCOM-McKinsey

report, annual revenue projections forIndias IT industry in 2008 are US $ 87billion.

IT industry will attract Foreign Direct

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BARRIERS:

MAT extension to the IT industry wouldmean big erosion in profitability of thecompany.

Increase in education cess from 2% to3% would prove to be an additionalburden to the IT industry.

Inclusion of ESOPs in FBT Ideally, thismeasure should follow internationalnorm of withholding tax .

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SOURCES:

The rise of India by NiranjanRajadhyakshaFrom underdogs to tigers by Ashish

Arorahttp://www.cerna.ensmp.fr11 th five year plan

www.swedishtrade.sehttp://mpra.ub.uni-muenchen.de/http://www.nasscom.in/htt : www.mit. ov.in default.as x

http://www.cerna.ensmp.fr/http://www.swedishtrade.se/http://mpra.ub.uni-muenchen.de/http://www.nasscom.in/http://www.mit.gov.in/default.aspx/http://www.mit.gov.in/default.aspx/http://www.nasscom.in/http://mpra.ub.uni-muenchen.de/http://www.swedishtrade.se/http://www.cerna.ensmp.fr/

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