INDIAN IT AND ITES JOURNEY: LIBERALIZATION AND BEYOND.

The 1991 reforms gave a fillip to India’s IT sector; 25 years on, India is poised to ride the next technology revolution as the third biggest start-up hub globally

Early public policy in an independent India focused on economic planning, adopting new technologies, and nurturing indigenous science and technology talent. About 50 years down the line, the early 1990s saw a move towards market-oriented economic policies to expand private investment in driving growth. This gave a fillip to the IT and ITeS industry.

The size of the Indian IT and ITeS industry grew from $100 million in 1990 to $1 billion by 1996, changing the course of development of this country forever. However, the journey began much earlier in the 1950s when the first modern computer was installed at the Indian Statistical Institute in Kolkata by Prof. P.C. Mahalanobis.

The 1960s saw the start of computer education programmes at Indian Institutes of Technology. The government of India established the department of electronics (DoE) in 1970 to oversee all aspects of electronics, including computers.

The first indigenously built TDC-312 computer was launched by the Electronics Corporation of India Ltd in 1974. The Santacruz Electronic Export Processing Zone—the first dedicated IT park—was established in Mumbai to promote the export of electronics products and software in 1973.

From a policy perspective, the 1970s was an interesting decade. While a DoE panel on minicomputers submitted a report on the indigenous manufacture of minicomputers in 1973, it was kept in the cold storage for five years.

The Foreign Exchange Regulation Act, which posed restrictions on the use of foreign exchange by Indian citizens and organizations, also came into play in 1973. The Act made it very difficult for Indian organizations to import computers. The minicomputer policy was finally announced in 1978, and companies such as DCM, ORG and HCL (founded by Shiv Nadar and team) started to make minicomputers in 1979.

The mid-1970s also saw multinational corporations dilute their stake or leave India due to the Foreign Exchange Regulation Act, leading to the establishment of the Computer Maintenance Corp. by the government to maintain existing IBM installations in India.

However, the most important policy in this era saw the DoE allowing the import of computers exclusively meant for software export, a step that in many ways set the tone for the future.

The 1980s witnessed India’s first wave of IT entrepreneurship. Wipro Information Technology Ltd (by Azim Premji and team), Infosys (by Narayana Murthy and team), NIIT (by Rajendra Pawar and team), Mastek (by Ashank Desai and team) and many more “start-ups” were established during this time.

It was during this time that the software services export market opened up lucrative opportunities. The government made some watershed decisions, including bringing in the new computer policy, which initiated liberalization of the computer industry. The Rangarajan Committee recommendations led to banking computerization. This, in turn, saw companies such as Tata Consultancy Services and Infosys develop banking products—a segment where Indian products would go on to be world leaders. The Rajaraman Committee report brought in concessions for the import of computers against software exports. The iconic Railways Passenger Reservation project was initiated in this same period.

The 1980s also saw the newly established Centre for Development of Advanced Computing set up a National Supercomputer Centre at the Indian Institute of Science, Bangalore, and we sent our first email. Multinationals such as Citibank and Texas Instruments, for the first time, set up software development centres in India during the 1980s. This period saw several joint ventures in place to manufacture computers in India—Hinditron-DEC, HCL-HP, PSI-Bull and others, making PCs more affordable.

While the Manufacturers’ Association for Information Technology formed in 1982 represented the growing IT hardware industry, the establishment of Nasscom in 1988 gave the nascent software players a voice. The world increasingly became a connected one even though it was powered by 64kbps leased lines!

The 1990s was seminal not only for the IT and ITeS industries, but for the country as a whole. From policies that looked at regulated growth, we moved ahead, buoyed by the winds of liberalization. India’s super-computing programme was launched in 1991. The industry pioneered the global delivery model that redefined the way work was delivered. This could not have happened without the Software Technology Park scheme designed by IAS officer N. Vittal. Thousands of talented people joined the industry drawn by its promise. The industry embraced the quality movement—first with ISO 9001 and then with SEI-CMM. By 1999, 50% of the SEI-CMM Level 5 organizations in the world were from India. Indian IT majors listed on Indian and global bourses at the same time.

Encouraged by the government’s liberal policies, MNCs like IBM came back to India and expanded opportunities for the industry further. GE and Nortel set up the first large-scale offshore development centres. The Y2K opportunity opened up unprecedented opportunities for India—led by its vast technical talent pool and industry friendly policies. And thereafter, there was no looking back. By 2000, the Indian IT industry had grown to over $5 billion of revenue—that was 50x from 1990.

Today, the industry revenue stands at an estimated $160 billion, employing 3.5 million people. India is also poised to ride the next technology revolution as the third biggest start-up hub globally.

(Kris S. Goplakrishnan is co-founder, Infosys, and chairman, Axilor Ventures. He recently launched itihaasa, the first digital app tracking 60 years of Indian IT.)