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The Impact of Globalisation on India's Information Technology Industry

Paper Type: Free Essay Subject: Economics
Wordcount: 6976 words Published: 28th Oct 2021

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This paper analyses important changes taking place in the Indian information technology (IT) industry as it faces up to the challenge posed by state policy liberalisation and the ensuing process of globalisation. The impact of globalisation may be both positive and negative; it provides a pathway to continuous technological upgrading, but at the same time threatens the very survival of indigenous IT firms and their technological capabilities, painstakingly built on the basis of import substitution. Although Indian IT firms are seen to be responding to the changed economic and policy environment of the 1990s, the industry's future can only be secured by a renewed policy thrust on applications development for the domestic market accompanied by a push for IT diffusion as against mere production. While the paper cautions against generalised policy prescriptions, it illustrates the significance of pragmatic policies that can help obtain the maximum benefits from IT while coping with the rapid technological changes that characterise the industry.

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1. Introduction

Over the past decade, there has been growing interest in the nature, scope and impact of state policy to stimulate economic development through more rapid technological advances and expansion of productive capabilities for both domestic and foreign markets (Brown and Rushing, 1986). The focus in more recent years has increasingly been on high technology industries such as information technology (IT), characterised by product complexity and rapidity of technological change. In many countries throughout the world, the East Asian newly industrialised economies being only the latest examples, IT is being seen as a driving force in economic development and state policy as the means to explicitly facilitate its use and production (see Harindranath and Liebenau, 1993).

The rationale behind the deliberate promotion of an IT industry in countries like India immediately draws into question the domestic capability of developing economies to exploit international technological developments and harness them for their economic development. Different schools of thought within the realm of development studies, and particularly within studies of high technology based industrialisation, continue to treat this as a contentious issue. For instance, while the dependency school sees less developed economies as being permanently entwined in relations of dependency with the economically and technologically advanced countries, the bargaining school contends that international technological change tends to constrain the range of choice for less industrialised countries in their relations with the international system. Therefore, their adaptive capabilities in high technology areas are severely limited (see Grieco, 1984). However, the development strategies of many Asian countries, and particularly their experiences with IT, have necessitated a rethinking on these widely prevalent and generalised assumptions about the so called developing or Third World as a whole. Therefore, an adequate understanding of historical and economic processes calls for a rigorous analysis of specific cases (Nayar, 1983).

Based on a paper presented at the IFIP Working Group 9.4 International Conference on Information Technology and Socio-economic Development, 9—11 June, 1995, Cairo. A modified version of this paper has been published in Information Studies (Madras, India: Ranganathan Centre for Information Studies) Vol. l, No. 2, April 1995.

This paper is not merely meant to be a contribution towards this end. The paper analyses important changes that are taking place in the Indian IT industry in the 1990s, as a result of liberalisation of state policy and the accompanying process of globalisation. The paper does so by examining the manner in which the Indian IT industry is adapting and responding to policy change. While the phenomena of liberalisation and globalisation present immense opportunities in terms of access to the latest technology, they also pose grave threats to the survival of local IT firms, and hence India's technological capabilities in IT. Moreover, the process of globalisation of the Indian IT industry exemplifies an urgent need to make hard choices with regard to the age-old, but all important debate on IT use versus IT production. Lessons from the Indian experience will prove to be of significance for IT policy and IT industries in other industrialising economies, thus helping to provide useful insights into how these countires can maximise the benefits from IT while coping with the rapid technological changes that are characteristic of this industry.

Through the 1960s and early 1970s, India was entirely dependent on multinational corporations (MNCs) for IT equipment and software, and there was a general lack of any policy for the sector. Thereafter, India's approach to the development of this industry has passed through an entire gamut of policy variations, from import substitution during the late 1970s and early 1980s (Grieco, 1984; Mahalingam, 1989; Subramanian, 1992), to a cautious and gradual policy liberalisation in the mideighties, and then on to rapid liberalisation and attempts at globalisation during the 1990s. India's policy experience in the IT industry is also representative of a more global shift in development policy thinking from state intervention towards market oriented policies. However, the paper does not advocate an 'Indian model' or alternative to the development of an IT industry. Indeed, any such model for policy guidance can be simplistic and even deceptive, as what often come to be retrospectively termed 'models' are the result of growth trajectories that have tried and tested several policies, and learned from their experience, including learning from mistakes. Viewed from this perspective, the paper also constitutes a contribution to the limited but growing literature that seeks to disaggregate the so called Third World into heterogenous units at different economic levels of development, with a wide variety of policy experiences and specificities.

Before proceeding to examine the impact of globalisation on the Indian IT industry, a brief consideration of the concepts of state policy liberalisation and globalisation is in order.

2. Liberalisation and globalisation

Liberalisation is the key policy prescription originating from the neo-liberal thinking on development. In its milder form, neo-liberals recognise the possibility of market failures, but consider imperfect markets to be better than imperfect states. Therefore, they argue against any form of state intervention in the economic affairs of a country. In contrast, structuralist thinkers invariably prescribe some form of state intervention, though they do not altogether preclude the role of the market in economic development. Liberalisation, then, can be conceptualised as a move away from the structuralist extreme towards more market oriented economic policies (Colclough, 1991; I-leeks, 1991, pp. 5-10).

Globalisation may be seen as an outcome of liberalisation. However, while certain types of liberalisation may merely imply limited deregulation and privatisation, the process of globalisation goes far beyond both, and involves an active attempt at becoming a part of the global economy. By its very nature, globalisation involves as an imperative the need to take the international market into serious consideration while making any investment decision in an economy or sector (Sen, 1992). This implies that investment and production will aim at achieving international levels of quality and cost, so that local producers have the option to export when there is slack domestic demand. Thus, successful globalisation invariably requires 'an active interaction with industrialised societies and MNCs' (Prahalad, 1993).

3. Globalising the Indian IT industry

The attempt to globalise the Indian IT industry in the 1990s has been a direct consequence of the macro economic problems faced by the country in 1991. For a holistic understanding of the changes in state policy for the IT industry, we need to put this industry in a macro economic perspective and against the backdrop of India's changing policy trajectory over the decades.

The post-independence policy regime in India gave primary importance to self reliance, and as a result attempted to produce all that, in principle, the country was capable of producing. Static comparative advantages were discarded for the creation of dynamic ones, especially in high technology areas. As with the rest of the economy, the computer hardware manufacturing industry was also subjected to import substitution until the mid-1980s, while software related policies have traditionally been export oriented and hence less protectionist. A system of industrial licensing was established to regulate not merely the entry of firms, but also their expansion, diversification and even their exit from the industry. Policy measures were also put in place to encourage the regional dispersion of industrial growth, and specifically to protect small scale enterprises. This in turn encouraged firms to set up sub-optimal scales of production. Along with this, a system of import licensing and abnormally high customs tariffs protected the domestic industry from foreign competition. This guaranteed good profit margins despite the low production volumes. Further, high tariffs on the import of complete systems provided sufficient incentive for local manufacturing even though the actual import content of such systems were very high. While this was aimed at building domestic technological capabilities, it also provided across-the-board protection to even inefficient firms that operated with no concern for relative costs of domestic and foreign production, or even quality.

These policies resulted in a woefully inefficient, high cost industrial structure in genera1[1], and a large number of inefficient assemblers in the computer industry who added no value to the products they claimed to manufacture within the country. Further, these firms needed continued sheltering from foreign competition for their very survival. Thus India's import substituting industrial strategy soon became the country's developmental bane, as it transformed itself into a bureaucratic maze of controls, regulation and red tape. The logic of development itself was thwarted by the new logic of self-serving regulators who formed India's vast bureaucracy. Though the policy framework did lead to some level of technological capability in IT3 , the regime was not geared to facilitate efficient, quality conscious production based on economies of scale or scope, constant technological upgrading, competition and hence returns on investments.

A new national computer policy was announced in 1984 (Gol, 1984), which legitimised the assembly business by permitting large scale imports of computer kits from South East Asia. The policy which effectively bid farewell to indigenisation and self-reliance also initiated a gradual shift from physical to financial controls on industry. The policy resulted in a 'kit culture' promoted by a large number of small entrepreneurs who lacked design skills and the investment necessary to build economically viable hardware manufacturing units. However, the policy was successful in making personal computers more easily available to users.

Meanwhile, on the macro economic front, mounting government expenditure and fiscal deficits throughout the 1980s, and an alarming depletion of foreign exchange reserves, led to a major crisis in 1991. This state of affairs, coupled with the success stories of many East Asian countries, led to the realisation that the Indian economy was becoming not only increasingly inefficient but also marginalised in the world economy. The macro economic crisis further provided the opportunity and the necessity to liberalise and to establish a firm linkage with the global economy (Bhagwati and Srinivasan, 1993). Thus the structural reforms that were begun in 1991 sought to link India's economy with the rest of the world by aggressively inviting direct foreign investment and establishing quality consciousness in Indian industries, and by attempting to make them internationally competitive. These reforms can be seen as having initiated the process of globalising the Indian economy. As far as the IT industry is concerned, policies since 1991 have been qualitatively different from the previous decades. While the 1984 policy was aimed at giving a boost to computerisation, the liberalisation measures undertaken since 1991 have been explicitly aimed at globalising the Indian IT industry.

This implies a radically different approach to development, an approach built on a premise of 'mutual dependency' (Prahalad, 1993) rather than one built upon complete self-reliance as was envisaged in the protectionist policies of the past. Policy changes since 1991 seem to endorse explicitly a position of 'mutual dependency', heralding a regime that calls for active collaboration with the global economy and its constituent units, be they states or global enterprises. This policy change from protection to globalisation has presented the Indian IT industry with severe transitional problems. Indeed, the industry's future hinges on the manner in which it adapts and responds to these changes in state policy. The remaining sections of the paper examine the implications of this policy change for India's IT industry.

For instance, systems design capabilities were built up by firms such as HCL (now, HCL-HewIett Packard), DCM Data Products, ORG, and Wipro Infotech.

Data for this paper were collected through the analysis of 44 interviews with Indian government officials and company executives during January — May 1994.

4. Implications for the hardware industry

4.1. From manufacturing to trading and systems design

India's import substituting policy regime forced firms to manufacture computers within the country. However, indigenisation proved difficult, and even impossible to achieve due to the rapidity of technological change and the non-availability of locally made components . In a radical move, the 1991 industrial policy abolished the system of industrial licensing for the computer industry, and increased the foreign investment limit in Indian companies, thereby signalling the entry of MNCs and a higher degree of competitiveness. The nature of computer hardware manufacturing in the country began changing around this time, from the classical sense of producing goods from the component level i.e. vertical integration, to either specialised manufacturing of some components such as printed circuit boards and moulds, wherein a firm has the advantage of volumes, or the integration of bought components, testing and further value addition where possible. By 1993, severe competition from MNCs and a slackening of government buying had led to extremely thin profit margins for the industry.

By 1994—1995, reductions in customs tariff had made it more lucrative for firms to import complete computer systems in comparison to the import of crucial inputs such as central processing units, hard disk drives and memories for assembly within the country. This was due to the marginal import tariff differential between inputs and full computer systems, which effectively rendered manufacturing for the low volume market economically unviable. The policy thus found favour with importers and traders, as well as illegal assemblers who paid no customs tariff6 , and in turn put manufacturers at a relative disadvantage (for details see Computers Today, 1994; Economic Times, 1994). Further, the capital intensity of the hardware industry also offset any incentive that arose from India's low labour costs. However, pressure from manufacturers and the need to curb the growth of illegal assembly have now forced a change in the tariff structure. While new tariff reductions announced in the government's 1995—1996 annual budget (see Subramanyan and Gupta, 1995) are certain to lower the cost of equipment, its impact on manufacturing may not be immediate until production volumes increase within the country.

Although liberalisation has made it easier for Indian firms to do business with foreign partners, firms that have invested in setting up manufacturing facilities and in building up design capabilities are having to make difficult choices about future strategies . Many of these firms are undergoing a transition from manufacturing equipment to value addition through systems integration and software development. Thus, globalisation is changing the profile of the hardware industry with a current turnover of around US$ 470 million, from assembly and manufacturing to trading and systems integration. While the shift from manufacturing to trading is certain to emphasise issues concerning brand names at the expense of more substantive issues of technology development, the trend towards systems integration may yet represent an immensely important niche for Indian IT firms. It may also be the only viable alternative for the very survival of the Indian hardware industry.

The import content of an Indian made computer is at least 64% (Verma, 1993).

Nearly 18% of the total revenue from domestic microcomputer sales in 1993 went to the unorganised, illegal assembly sector, also called the 'grey market'. This share is expected to increase to 30% by 1997 (Subramanian, 1993).

These include firms like Digital Equipment (India) Limited (DEIL), Tata Unisys Limited (TUL), Microland, Modi Olivetti Limited (MOL) and Tata Information Systems Limited (TISL).

These include DCM Data Systems (DCM DS), Pertech Computers Limited (PCL), Electronics Corporation of India Limited (ECL), International Computers Indian Manufacture Limited (ICIM), and Wipro Infotech Limited (WITL). Some of these firms have been assembling or manufacturing systems based on indigenous designs.

4.2. Sustaining domestic technological capability

Although globalisation can be expected to have a positive impact on IT use in the country due to price reductions and improvements in quality as a result of competition, it may also have a negative impact on the technological capability of some domestic hardware manufacturing firms. Import substitution had forced these firms to painstakingly build up the capability to manufacture systems based on indigenous designs, often at great economic cost. Liberalisation and the ready availability of foreign technology may lead to a gradual waning of such skills. Further, these firms have traditionally invested some resources into in-house research and development (R&D), which has enabled faster technology absorption. However, the current policy environment has made these minuscule but locally relevant R&D investments economically unsustainable. A total waning of domestic technological capabilities may be prevented by implementing a policy with a renewed focus on computerisation and IT applications for the domestic market. This will not only have a direct impact on IT use in the country but will also aid the industry's growth. A large and healthy domestic market for IT applications will help build locally relevant capabilities and design skills, as well as improve the domestic IT industry's turnover. This can also serve as a platform for exports. Unfortunately, the government lacks such strategic thinking for deploying technology for local developmental applications. Indeed, strategic thinking from the government is essential to direct attention of entrepreneurs to the special needs of the domestic economy, and this is particularly true in the case of a globalised market economy (for instance, see Kapstein, 1994).

4.3. Towards multiple international linkages

Globalisation has resulted in Indian IT firms seeking multiple linkages with foreign firms. Generally, such linkages involve local firms in a variety of technological and business alliances with foreign firms. For instance, almost every company among the top twenty revenue earners in the Indian IT industry has one or more tie-ups with international IT companies, which range from joint ventures with equity participation and technology transfer arrangements, marketing and distribution, to software development and contract manufacturing of peripherals or hardware.

A tie-up with a multinational or foreign company not only provides credibility to the newly established local firm, but also helps meet the firm's financial requirements better as investors usually expect good returns from a foreign alliance. Such partnerships also tend to attract better quality manpower (Kannan, 1993). However, a more important reason for the rapid increase in tieups is the lack of a brand image for Indian products. Indeed, this may become a major constraint on future export growth for both hardware and software firms. Tie-ups with foreign firms are thus seen to be necessary to gain a foothold in alien markets.

Although globalisation of the economy since 1991 has brought every major international IT company into India, many prefer marketing and distribution arrangements to any long term commitment to the relatively small Indian market. Whereas such ventures do not contribute to the development of capabilities of Indian firms, agreements involving some amount of value addition by the Indian partner would help to keep domestic capabilities alive, particularly when international linkages are affecting the very survival of indigenous design skills.

5. Impact of policy change on India's software industry

5.1. Policy for software exports

The Indian government began to consider seriously the provision of infrastructure and incentives for software exports from the country only around the mid-eighties, as foreign firms increasingly turned towards India's low cost, skilled software professionals. A software policy was announced in 1986 (Gol, 1986), that permitted the import of the latest foreign designs and software development tools in order to enable the Indian industry to produce world class software for exports (Sampath, 1988, p. 66). However, the government failed to create and sustain a large domestic market for software and IT applications, which could have provided the industry with immense opportunities for experimenting and learning. This in turn could have helped the industry in its export efforts.

A major initiative called the Software Technology Park (STP) scheme was launched by the government in 1990 to provide 'motherly treatment' for companies and small entrepreneurs who could not afford expensive communications facilities. Units in an STP are eligible for liberal import of hardware and software tools, tax exemptions, and easy access to satellite links. There are nearly 225 software units operating under this scheme, and they exported software worth US$ 80 million in 1994—1995 (Asian Age, 1995). Thus, the government has been actively encouraging software exports since the late 1980s.

5.2. From 'body shopping' towards offshore activities

India exported software worth around US$ 500 million in 1994—1995. The export turnover is expected to reach US$ 1 billion by 1997 (Asian Age, 1995). Although almost 59% of the current software exports from the country can be characterised as 'body shopping' , the practice of sending programmers to work on site abroad, the criticisms[2]levelled against it by some in the industry and government are unfair. This is because body shopping is essential for building credibility and trust between the Indian firm and its foreign client. However, the rapidly increasing interest among even small software firms to obtain satellite links proves that there is a definite trend towards offshore activities, including export of projects and turnkey solutions.

There are tremendous opportunities for Indian companies in outsourced professional services, particularly in the USA and increasingly in Europe (see Brij, 1994). But the most important hurdle facing the numerous small software companies in the country is the lack of a record or history of projects behind them. The government, which is the single largest customer for customised software, can enable this process by entrusting the industry with applications development jobs. However, most of these jobs either go to public sector companies or are executed in-house. It would be in the general interest of the industry if such projects were equally accessible to firms in the private sector. Interestingly, several public sector companies are hiving off their software divisions into separate units and some have also entered into tie-ups with foreign firms. For instance, Hindustan Aerospace Limited (HAL) has entered into an alliance with British Aerospace to develop aviation software. Steel Authority of India Limited (SAIL) is also separately marketing its process control software. This is indeed an important development, as software manufactured by such units are generally specialised and involve high value addition.

The development of packaged software is only in its initial stages in the country, with firms like Tata Consultancy Services (TCS) and Infosys Technologies Limited selling their products abroad 10 However, it is doubtful if Indian companies are capable of frequently risking the huge investments necessary for efforts at international marketing. Globalisation has presented some Indian software firms with an innovative opportunity to serve as 'software labs' for MNCs. In order to save its in-house research capabilities from dying due to globalisation, Wipro Infotech has converted its R&D unit into offshore 'software labs' for MNCs such as Sun, Tandem, and Chorus.

Although software exports are on top of the priority list for most firms, a more pragmatic opinion might suggest that the government got carried away with software exports. India's best software engineers are leaving the country for lucrative jobs abroad, and among those that remain, many are being used for coding, as against systems development. The absence of brand image, inadequate marketing resources, and the paucity of cheap finance are some of the issues that need to be addressed so that rapid growth rates as seen until now can be sustained into the future. Moreover, there is an urgent need to focus on updating continuously relevant software engineering and systems design skills in order to maintain and improve the software industry's existing capabilities.

6. IT use and applications development in the domestic market

A major drawback of current policy is the absence of any consistent effort at either applications development for domestic use 11 or the creation of a strong domestic market for software (see Gupta, 1994). With the value of domestic software production reaching only around US$ 350 million in 1993—1994, the possibilities for applications development and further growth in the domestic market are enormous. The realisation of this potential is now slowly leading to a shift in focus from manufacturing to applications development. The customs tariff reductions on software imports, announced in the 1994—1995 annual budget as well as in the budget of 1995—1996, have the potential of boosting indigenous skills through greater exposure to international software as well as increased competition. The lowering of import tariffs may also reduce piracy and increase the availability of machine critical software. Further, the May 1994 amendment to the Indian Copyright Law empowers the government to punish those who breach the copyright or engage in piracy. The amendment has also for the first time specified what is legal and illegal copying of software, and defined who an author is and what his or her rights are. The new law may help to encourage software development for the domestic market.

Examples include E.X, the accounting package from TCS, and DMAP, the distribution management application package from Infosys. Firms such as OMC Computers, which have inadequate marketing resources, sell their packaged software through foreign partners.

There is an argument that the government should have first helped create a software industry and then backward integrated into hardware rather than vice versa. Some industry watchers hold that the lack of a sufficiently developed local software market is the result of the government's hardware oriented policies (for instance, see Hebalkar, 1988, PP- 74—78).

With liberalisation and the ensuing globalisation, the use of IT to enhance competitiveness and productivity has become an imperative not merely for Indian industry, but also for the government and administration to respond rapidly to the needs of an economy in transition. Sen (1993) expresses this forcefully: there is an organic linkage between the general macroeconomic conditions of a country and the state of a critical infrastructural sector like informatics, which can be ignored only at some peril particularly when major structural changes are being contemplated'.

The fact that IT diffusion in India is still in its infancy suggests several possible explanations. On the one hand, the protectionist policy regime stressed production as against IT use, and made IT procurement an expensive [3]and procedurally difficult proposition, and on the other, the government's attitude that computers were meant for social elites limited computerisation within government and administration. It could also be argued that the use of IT in a resource poor economy plagued by unemployment presents the government with a politically and socially sensitive problem. This is often surmounted by inadequate IT awareness, and a lack of understanding of the importance of IT in improving administrative and business operations. It is here that governments can play very effective roles, and precisely where the Indian government had failed to convince the masses early enough. As a result, almost four decades after the first computer entered the country in 1955, and after more than two decades of policy for IT, there are only around 1 million PCs in use in the country. With an annual turnover of around US$ 1.6 billion, the entire Indian IT industry contributes less than 1% of the country's GDP.

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At a more basic level, policy has failed to convince people of the need for change, and the need for improving productivity through computerisation. This awareness is now creeping in, not because of any policy emphasis on IT use, but simply because businesses are trying to cope with India's globalising economy, and the accompanying high levels of competition from MNCs. At this juncture, it is important for India, and indeed for any industrialising economy on the path of economic restructuring and liberalisation, to strengthen the country's IT and telecommunications infrastructure. In the absence of such an infrastructure and a culture of IT use in government and business, there is a very real danger of the domestic industry succumbing to increasing international competition from MNCs as well as from other industrialising economies (see Narasimhan, 1993; sen, 1993).

In a positive move, the gradual change in the goverment's 'controlling' attitude has led many regional goverments in the country to establish organisations that direct or advise on computerisation within their departments. As the government and the public sector account for nearly 70% of the total IT market in the country, they could provide greater consistency and a great fillip to the IT industry by progressively increasing their IT use. But the DOE recommendation that all government departments earmark at least 1—3% of their annual budgets for procuring and utilising electronics and IT (Vittal, 1993), has not met with much success. However, the government's recent focus on infrastructure, progressive deregulation of public utilities, banking and financial services, and the overhaul of the telecommunications sector can be consciously used to begin a new drive for computerisation in the country, thereby positively impacting the growth of the IT industry[4].

7. Conclusions

India's protectionist policy regime had ensured a competitive advantage for hardware manufacturers within the domestic market. But with globalisation, IT firms in the country are having to think globally in order to become efficient and competitive. It has changed their perceptions about themselves and their capabilities vis-a-vis the global market, and this in turn has encouraged them to position themselves around their core competencies. Current survival strategies of most IT firms in the country have been to move towards software exports where profits are higher and tie-ups with foreign firms. Most Indian IT firms are becoming increasingly outward oriented, and some are becoming resource centres for MNCs. This may have important implications for the use of existing skills for domestic purposes. The implication may be positive to the extent that skills developed through work for foreign firms may lead to better designed systems or software for the domestic market, and negative to the extent that local skills may be increasingly directed towards the more lucrative work for MNCs rather than for domestic purposes. Therefore, it becomes imperative for the government, the largest IT user in the country, to particularly encourage applications development for the domestic market. Contrary to popular perception, liberalisation has much to do with the role of government. It should imply a move away from a regulatory state to one that nurtures industry.

State policy liberalisation and globalisation in the 1990s have left Indian IT firms with very little option but to make hard choices with regard to their core business activities and their future niches. Many firms have been severely shaken by the rapid rise in competition, shrinking profit margins, and the organisational changes necessary to cope with a drastically changed economic and policy environment. And many are responding to the challenges, thereby helping to improve IT use in the country. We have thus seen that India has not only been able to enter the technologically sophisticated realm of IT, but has also learned from policy failures and has been able to adapt and change to meet the requirements of the 1990s. The keywords to remember are adaptation and change. Less industrialised or developing economies, heterogenous as they are, need to adapt their IT policies to suit not merely their socio-economic priorities, but should also continually monitor and analyse the opportunities and constraints posed by globalisation. Policies need to aim at encouraging IT use, and then depending on the idiosyncrasies of the particular market, move up the ladder of technological capability into software services and systems integration. In a global system, more than any others, poor countries cannot afford to remain technologically isolated, as economic well being has come to depend on technology and its application for development.


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[1] For a brief review of industrial policies till the mid-1980s, see (Ahluwalia, 1988).

[2] Body shopping has often been criticised as the mere export of coding skills and that it makes no real contribution to the development of the software industry's capabilities or in the promotion of India as an international source for high quality software.

[3] It has been estimated by economists that an increase in the price of a computer by 10% usually depresses demand by 15% (Flamm, 1988, p. 69).

[4] The computerisation of the financial sector has served as the engine of growth for the IT industry in several countries (Flamm, 1988, p. 72).


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