Impressive performance of software sector in attracting investment and augmenting exports is due to the fact that government evolved, implemented, and pursued on a sustained basis a proactive policy, says Ashok Kundra in ‘India-China: A comparative analysis of FDI policy and performance’ (www.academicfoundation.com). Setting up of STPs, implementing the recommendations of the National Task Force on Information Technology and Software Development, and allowing ADR/GDR-linked stock options to employees have helped rapid growth of the sector, he adds.
The success, according to Kundra, is also due to the special nature of the software development process. “For software development, neither raw materials are required, nor are finished products to be moved to ports. Therefore, unlike manufacturing units, software units do not face problems of lead time or lags in import of raw materials or congestion at ports. The product has no bulk or visibility.”
However, on another point – that software is not amenable to tortuous physical examination by customs authorities, as data is transferred through satellite with speed and ease – there can be divergent views, considering the increase in tax litigation about software.
The author is of the view that inflexible labour laws have little adverse impact on software units because the work force comprises mostly professionals; and that the industry bears minimal impact of poor infrastructure, red tape and procedural hassles.
“These favourable factors have facilitated a synergic relationship between capital, workforce, and technology for development of software in line with comparative cost advantage,” he concludes.
Topical study.
