This stupendous growth has been driven by the growth in e-commerce. In the latter part of the nineties software exports have come to occupy a major place in India's invisible exports. In 1998-99, net inflows under non -factor services increased to $2.16 billion from $1.31 billion in the previous year, largely fired by a commendable increase of 54 per cent in software exports.

India's software sector outpaces the growth rate of the global as well as Asian software sector. The global IT industry valued at over $705 billion has been growing at 12 per cent a year. Of this, software accounts for 53 per cent. The US software sector accounts for 40 per cent of the global IT market. Japan and five of the European countries control about 40 per cent.

Rapid technological changes have driven the growth of the global, Asian and Indian software sectors. But their impact on growth differs from region to region.

In the words of Alan Greenspan, chairman, Federal Reserve, USA, "It is information technology that defines this special period." Asian trade, investment and production are linked to technology. It is well known that IT advances tend to reduce uncertainty and foster global production. Singapore, Hong Kong and Taiwan with strong innovative capacity may forge ahead.

Philippines, Indonesia and Thailand may have to depend on FDI inflow for sometime in the future. Yet Salomon Smith Barney, the equity research firm says, "We conclude that global tech is not a strong driver of Asian growth than its non-tech counterpart, but it is faster growing." India has tremendous potential in exploiting the software services segment.

The Indian software companies are basically service providers, therefore are well placed to cash in on the future boom in this segment. This is because Indian software programmer is 1/12th as expensive as is his European or American counterpart. The software industry is in an expansionist phase that may stretch over a long time. The Nasscom feels the industry would clock $87 billion revenue including exports of $ 50 billion by 2007-08.

The growth of the software sector has been spurred by an increase in the number of net users as well computer literate population. The Nasscom has placed the number of personal computers at over five million in 68 cities. It is quite likely that smaller towns will have more users as the Internet digs deep in the course of time. Right now it seems the state capitals dominate the use of Internet with a 77 per cent share. Cable TVs network will spur the spread of the Internet.

Among the net users 77 per cent come from the youth in the age category of 18-39 years. About 48 per cent use the net daily. There is no doubt that software segment and the IT sector are set to define the growth alchemy of India in the future. Yet the commodity sector in the country is very large and may continue to dominate the growth parameters for a long time. The Nasscom has appealed to the government to consider the removal of tax anomalies in the tax structure of software companies under software technology parks or export oriented units.

The Section 10(a) and 10(b) of Income Tax Act says the company loses the benefit of tax exemption if there is a change in the shareholding upto 51 per cent within a year. It also wants the government to consider issues relating to tax computation for those units located both within and outside the software technology parks.

The Indian software companies are expected to employ about one million professionals and may account for about a quarter of India's exports by 2005. The software is not a mere ensemble of skills nor a simple manpower contracting business. The established software companies have distinct advantages such as an ability to estimate accurately time and cost besides an ability to attract and retain people. They also possess pricing power with their clients. They can strike new business as well maintain the old one through modifications and customisation.

Top companies such as Infosys Wipro and NIIT are examples of successful Indian software companies with critical mass that have made it to the global arena. Satyam, Tata Infotech, Pentafour, TCS, Digital, CMC, DSQ, HCL Infosys, Leading Edge and Mastek are other companies with critical mass.

Most top software companies also possess advantages such as project management experience, marketing infrastructure and a strength to withstand financial shocks caused by payment default.

India's software growth is subject to a few caveats. The first relates to the cyclical nature of the software business. The recent meltdown of the software companies scrips on the Nasdaq and its fallout on India is an example. Indian software companies depend overwhelmingly on the US economy that is prone to business downswings. Challenges arising out of the changing technological imperatives will determine the future of the Indian software sector.

The Internet is coming in a big way and it is both an opportunity as well as a challenge. The Indian software companies will have to reorient themselves to the changing requirements of the business in the Western countries especially the US and Europe. Many countries in Asia are also catching up with India. China has already begun to make its presence felt in the global market. Yet India has leverage in its strong base of English language and a network of higher institutions of learning and a structure of educational courses that can be moulded to suit the changing requirements of global software sector.

SR Kasbekar