Источник The Hindu Business Line.com, Chennai, India
Заголовок Why Indian IT needs an urgent reboot - OPINION
Дата 20180213

Этим цветом обозначаются известные системе слова и выражения, но не значимые для данного текста, а таким - идентифицированные, то есть соотнесенные с каким-либо объектом онтологической базы

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Why Indian IT needs an urgent reboot - OPINION

For India’s post-liberalisation poster-child, the software and IT-enabled
services industry, recent developments in the global economy are bound to be
disconcerting. Even as early signs of a synchronised global recovery emerge,
fears of inflation• Экономика » Макроэкономика » макроэкономические индикаторы » инфляция

• Экономика » Финансы » инфляция
and high interest rates have resulted in a collapse of
capital markets. What that could do to the incipient recovery is as yet
unclear and the prognosis is uncertain. But for an industry that has been
battling a slowdown ever since the 2008 global financial crisis• Инфляция, that is
clearly not good news.

According to RBI survey figures released in December last year, India’s
approximately $150 billion information technology industry earned $97.1
billion in foreign exchange in 2016-17, as compared with $88 billion in
2015-16, through the exports of software and IT-enabled services.

That 10 per cent rate of growth does not seem too bad, just as the near
continuous increase in the rupee value of export of software and IT-enabled
services (Chart 1). The true story resides, however, in the figures on growth
of these exports in dollar terms in the years after the global crisis.

Downward trend

According to data from the RBI, the rate of growth of the combined exports of
software and IT-enabled services in dollar terms has fallen from 20.8 per cent
in 2012-13 to 14-15 per cent during 2012-15, and further to 7.3 and 10.3 per
cent in 2015-16 and 2016-17 (Chart 2). Fluctuations of the rupee result in
significant divergences between growth rates of exports denominated in rupee
and dollar terms, with the former exaggerating growth in most years. It is the
dollar value of exports that capture actual export performance.

Besides revealing the downward trend in the dollar value of software and
IT-enabled exports, these figures are disconcerting because they point to the
ageing of an industry that was for long accustomed to much higher rates of
growth of exports and revenues, and, along with remittances from Indian
workers abroad, had helped shore up India’s balance of payments.

In the first 15 years after the launch of liberalisation, India’s IT industry
recorded remarkable growth because it exploited an outsourcing opportunity by
perfecting a global delivery model for software and IT-enabled services based
on cheap skilled labour.

As a result, IT industry revenues grew at high double digit levels with export
earnings accounting for a large share of those revenues. However, there were a
number of features of that model that made it vulnerable to the changed
circumstances since the global crisis of 2008. To start with, the industry’s
exports were largely directed to the US market, followed by the EU at a
distant second. If at the turn of the century the North American market
accounted for close to two-thirds of India’s IT exports and the EU for about a
quarter, even in 2016-17 the US and Canada came in first with 60 per cent of
the industry’s exports, and Europe second with 23 per cent. Not much has

Overseas reliance

Secondly, the delivery model required combining offshore delivery with local
services provision, to customise services and even maintain operations. So
on-site work remained an important component of the industry’s activity. In
2002-03, 48 per cent of India’s exports of IT services was through the medium
of a commercial presence on foreign soil and another 13.5 per cent through the
presence of natural persons. By 2016-17 those figures had come down to 19.9
and 13.9 per cent respectively. Thus, more than a third of revenues depend on
operations abroad (Chart 3).

Given these characteristics, a range of developments since the global crisis
of 2007-08 have been posing challenges to the industry. Since the financial
crisis• Инфляция
and the Great Recession that followed originated in the US and affected
mainly the developed countries, the main markets of the industry have turned

On average demand growth has been low by historical standards. Overall,
precisely at a time when the industry had grown to maturity and was hard put
to maintain market share and grow at dramatic rates, the markets themselves
were losing momentum.

Moreover, the absence of any robust recovery a decade after the crisis first
broke has set off protectionist tendencies. The accusation that on-site
provision of services by firms from India based on H1-B visas involves the
importation of cheap labour for tasks that can be easily performed by
available and unemployed local labour, has grown louder. To deal with this
perceived “misuse” of H1-B visas, the Trump administration under its “Hire
American” programme has chosen to set a high floor to the annual salary that
must be paid to those availing them.

In November 2017, the House Judiciary Committee, in a first step to enact a
new law, passed a bill to raise the minimum salary raise for H-1B holders from
$60,000 to $90,000, besides subjecting H-1B dependent employers (or those
employing H-1B workers to the extent of 20 per cent of their workforce) to
greater scrutiny. The Protect and Grow American Jobs Act seeks to make it more
difficult for “H-1B dependent” companies to access new permits to hire foreign

Need to rediscover

Trump has also issued an executive order that aims to prevent “fraud “in the
use of such visas, by making sure that they are used only to import workers
with advanced degrees and higher skills. Here too salary paid is to be used as
an indicator of worker quality. That can be damaging. According to the
Financial Times• Средства массовой информации » сми-газеты » Газеты по странам » газеты великобритании » Financial Times
, “(m)ore than 80 per cent of the workers now on H-1B visas
earn less than the US median wage for their jobs,” and “(j)ust 5 per cent have
earnings in the highest wage tier”.

Indian workers account for 70 per cent of H1-B visas issued, according to data
from the US Department of State. Accommodating more of them could turn
difficult. And they would have to be paid much higher wages, raising costs and
squeezing profits.

Simply put, the global financial crisis• Инфляция has changed the external circumstances
confronting the software and IT-enabled export sector. The problems associated
with generating a recovery is only making matters worse.

Ageing has combined with these circumstances to make the industry less
dynamic, with firms that had made their name early and established their
presence continuing to dominate a sector afflicted by decelerating growth. If
the industry has to remain a leading sector it clearly needs to rediscover

Published on February 13, 2018

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