Much has been made in economic literature regarding newly indepen- dent India’s early emphasis on science and technology in the country’s growth strategy (Pingle 1999 ). However, despite this, electronics and computers did not register in state modernization plans until the 1960s.
Furthermore, the impetus to include electronics within the state’s devel- opment agenda was initially geopolitical rather than economic. Th e 1962
Table 10.2 Leading software service fi rms from major software service exporting countries in 2012
Country Firm
Year established
Total revenues ($bn)
Revenue growth 2011–2012 (%) India TCS 1968 11.6 30
Infosys 1981 7.4 19 Wipro 1980 6.9 17 USA IBM 1911 95.8 −2
Accenture 1913 27.9 9 France Cap Gemini 1967 13.1 6 China Neusoft 1991 1.1 21 Philippines SPi Global 1980 0.05 20 Malaysia Scicom Berhad 1997 0.1 2 Singapore QuEST 1997 0.2 49
Source: Data compiled from market information from the Financial Times: http://
markets.ft.com/research/Markets/Overview (accessed 14 February 2014)
Note: Accenture was offi cially established in 1989 under the name Anderson Consulting but has its roots in Arthur Anderson, which was established in 1913 Note II: Cap Gemini data in dollar terms from http://bpooutcomes.com/
capgemini-2012-results/
Note III: SPi Global data retrieved from http://www.spi-global.com/content- solutions/media-center/press-releases/pldt-sees-sustained-growth-bpo-unit- amid-positive-indu (accessed 14 February 2014)
Note IV: QuEST data retrieved from http://forbesindia.com/article/big-bet/
aerospace-engineering-fi rm-quest-globals-changing-lanes/35217/2 (accessed 14 February 2014)
Sino-Indian war had emphasized India’s technological backwardness vis-à- vis China. Th e sense that this needed addressing was heightened by the USA’s arms embargo on India following its 1965 confl ict with Pakistan (Evans 1992 ).
As such, in 1966, the Bhabha Report, India’s fi rst policy paper on the electronics industry, was published. Th e report suggested that the Indian state adopt a number of objectives towards electronics, the most important being that it should endeavour to establish wholly owned Indian computer-manufacturing fi rms as rapidly as possible (Agarwal 1985 ; Evans 1995 ; Grieco 1984 ). Th is, the report stressed, was necessary to ensure India’s national security and geopolitical autonomy. However, despite the author of the report being one of India’s most distinguished and high-ranking bureaucrats with close relations to the country’s political elite, this policy objective was not immediately acted upon by the state.
Th e reason for the dormancy towards the proposal was that infl uential vested interests, particularly the business houses (India’s largest conglom- erates), had reacted negatively to the report (Heeks 1996 ). Th ey feared that it would encourage the state to adopt an infant industry protection strategy towards computer manufacturing. Th is, they rightly concluded, would impede their ability to import low-cost computers from abroad.
Given that the business houses were becoming increasingly computer- ized, it could also hinder their long-term commercial strategies. As such, plans for developing an indigenous computer-manufacturing industry were shelved for the rest of the decade.
Th e strategy of infant industry protection in computer manufactur- ing was, however, rekindled in the 1970s. Th e rise of an intermediate class of small manufacturers in the late 1960s had begun to curb the political infl uence the business houses enjoyed over the ruling Congress Party (Bardhan 1984 ; Jha 1980 ). When the business houses had sought to bankroll a rival political party to the ruling Congress Party, in a bid to re-infl ate their fl agging infl uence in the corridors of power, Prime Minister and Congress Leader Indira Gandhi responded decisively. A whole raft of measures were swiftly introduced to restrict both the com- mercial operations and political activities of the business houses, ensur- ing a rift between the Congress and the business houses that lasted for a
decade. 5 One outcome, seemingly unimportant at the time, was that the previously ‘off -limits’ strategy of developing an indigenous computer- manufacturing industry could now be seriously considered.
In June 1970, and by direct decree of Indira Gandhi, the Department of Electronics was established to devise and implement electronics policy (Grieco 1984 ; Heeks 1996 ). Unsurprisingly, computer manufacturing was a top priority and the Department of Energy (DoE) quickly drew up plans to establish computer manufacturing in India. Th e decision was made to build up one fi rm to be the national champion, using a policy mixture of subsidies and market protection (Evans 1995 ; Subramanium 1992 ). 6 Th e rationale behind the decision to focus on one fi rm was that this would best utilize the scarce fi nancial, technical and skilled labour resources in India at the time. In order to prevent the national champion from abusing its monopoly, a public sector unit—Electronics Company of India Limited (ECIL)—was selected (Subramanium 1992 ).
Th is decision to develop a computer-manufacturing national cham- pion had important implications for the growth of the Indian software services industry. ECIL would have to import computer components and peripherals until domestic production of these elements had been achieved. But such imports would create large foreign exchange outlays which the Indian state could hardly manage. It was in this context that the DoE sought to look for opportunities to balance such outlays and stumbled across a 1968 report by Professor Narasimhan on the oppor- tunities for software export from India (cited in Subramanium 1992 ).
Th e report noted:
Software is also a labour intensive activity except that it requires intellectu- ally skilled manpower … software development would seem to have a very high employment potential in a country like India … the export potential, as well as the value-added, in the case of software is very large.
5 Th e most famous/infamous policy ‘punishing’ the business houses was the 1969 Monopolies and Restrictive Trade Practices (MRTP) Act.
6 Plans by the Indian government to dilute (through part Indian ownership) an IBM subsidiary in India that was manufacturing printers and convert it into a computer manufacturer failed. IBM’s top management opposed the dilution plans and—as a result—was forced to close down the subsidiary and leave the country.
Accepting such logic, and impelled by the desire to be seen as helping to generate foreign exchange, the DoE established the 1972 Software Export Scheme. Th e scheme provided concessional lending and tax breaks for management consultancies and would-be entrepreneurs willing to foray into the software export market (Grieco 1984 ). In more detail, the scheme allowed companies to import computers at signifi cantly lower duties and provided loans for such purposes, but insisted that the loan be repaid by foreign exchange generated through the export of software (Heeks 1996 ). In this way, it tied the domestic support of the state with the export performance of the fi rm.
Th e outcomes from the scheme were mixed.
On the one hand, it did not generate the levels of foreign exchange expected as fi rms failed to grow at the rates anticipated. Th is was primar- ily due to the manner in which the software was exported. While some of the services could be written in India and transported—typically on a tape—to the foreign fi rm, the fi nal instalment of the service required a hands-on approach whereby the employee of the Indian software fi rms would travel to the foreign fi rm’s headquarters and install the service.
Th is process was known as body-shopping. Th e problem was that the foreign fi rm would, subsequent to the service being delivered, often seek to poach the programmer and employ him/her in their own organization permanently (skilled software programmers being in short supply in the USA). Given the prospects of a much higher salary and permanent resi- dency in the USA, the Indian programmer would typically take up the opportunity. As a result, Indian software service fi rms struggled to retain experienced employees and therefore laboured to scale up and/or skill up the services they could off er.
On the other hand, the scheme did succeed in establishing an export- oriented software service industry in India, where there had been none earlier. In 1974, TCS was the fi rst fi rm to export software services from India to a consortium of US banks and within 6 years 20 companies were exporting software from India (Dossani 2005 ). Most signifi cantly, whereas Indian software service companies were building up a list of overseas clients, albeit more slowly than anticipated, similar fi rms elsewhere in the developing world remained entirely domestically ori- ented. In subsequent years, this diff erence would prove crucial.