Comment by Riaz Haq on September 3, 2020 at 1:47pm

An analysis of IT software and service exports from India


Manzoor Hassan Malik, Nirmala Velan
International Trade, Politics and Development

https://www.emerald.com/insight/content/doi/10.1108/ITPD-12-2019-00...


India is not an exception. The tremendous success of the IT sector after economic reforms, particularly in software and service exports, has influenced economic growth of the Indian economy. The importance of IT software and services has been increasing since the last decade, as reflected by its mounting shares in various macroeconomic parameters, like national income, total exports, employment and foreign exchange of the country. An abundant supply of labour force acts as a comparative advantage of the Indian software and services industry. Investments in the education industry in the form of Indian Institute of Technologies (IITs), Indian Institute of Management (IIMs) and engineering colleges over the years have significantly contributed to the growth of software and service industry. The country's abundant IT professionals have been absorbed by the software and services export sector, thus enjoying some sort of monopoly in supplying desired labour (Arora and Athreye, 2002). The benefit of the International Standard Organization (ISO) certification is also significant because it acts as a quality signal to potential customers. This certification has enabled to enjoy the firm’s enhanced income through higher level of price per unit of output besides increasing the quality of output (Arora and Asundi, 1999). Large changes in the locational division of labour brought more jobs to India. The real benefit to the industry comes through exports carried out on-site, which do not involve costs of hardware or software technology for the Indian firms.
Indian IT industry has recorded exceptional growth rate, particularly after the period of liberalization. It accomplished 51% compound annual growth rate, with it being the only nation to have this rate of growth during the period 1990 to 2002. The domestic software industry growth rate was even higher than that of the global industry (Kumar 2001). However, the IT industry witnessed a falling growth amid a worldwide change in innovation and business models since 2014. Its software and services exports are experiencing a skewed nature of slowdown in growth, essentially due to the reliance on North American and European markets. Furthermore, other developing nations, like China, Malaysia and the Philippines, are also entering into the world software market in meeting the global demands of software and services of the advanced nations by overcoming their earlier hurdles. Now, an important question that arises is how to deal with the global strategic paradigm shifts [1]. Answering this question requires an assessment of the direction and magnitude of the potential factors responsible for software and service exports. This article attempts to investigate the factors that influence software and service exports from India both positively and negatively. Such a study is important to understand in depth the impact of each determinant on software and service export, for formulation of policy measures for sustainability and competitiveness of the Indian IT industry.

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