Sunday, March 03, 2013

IT sector: a case of successful government intervention

It's fashionable to say that India's IT sector has been a terrific success precisely because it doesn't need support from government- it was never subject to the licensing regime, for instance. We know this is not true because the sector has been supported through tax concessions and because it was state-subsidised education that made possible the initial supply of trained personnel.

In a thought-provoking article in EPW, Jyoti Saraswati elaborates on the theme of state intervention and shows how the sector's success is, in fact, a case study in successful intervention, contrary to the nonsense that is spouted by advocates of neo-liberalism or the leading figures in the sector.

The author mentions two big forms of support in the initial period. One, the 1972 Software Export Scheme which provided 100% loans for computers meant for export use. Secondly, investment in telecom infrastructure that made possible off-shore delivery of services. The state has continued to support the sector in the post-liberalisation phase as well- the Software Technology Parks of India was one such significant initiative. Another point worth noting is that India's IT firms were able to move up the value chain by gaining experience in the domestic market which, by then, had begun to find use for their services. (eg CMC's experience in computerising the Indian railways' ticketing system helped it win the London Underground contract).

The author's  conclusion is worth quoting:
The experience of the Indian software industry over the past 20 years supports the argument that the Indian state should not be seen as pro-market but be understood as pro-business (Kohli 2010), i e, it is able and willing to intervene in support of selected sectors and industries regardless of the neo-liberal rhetoric it may espouse and the international diktats it claims to adhere to. Indeed, the state can continue to play a significant supporting role for firms, industries and sectors.
The broader point I would add is that private entrepreneurship in most countries flourishes on the back of covert or overt government support. The idea that the state should back off  and 'leave it to the market' is a myth that is perpetuated by private sector interests when it suits them. 


Pranam said...

I never knew this despite working in the IT industry for almost a decade. Nice one.

rohan said...

Actually, I always thought that the government is not doing enough to support to the IT sector.
For instance, we were close to a decade behind other countries in implementing 3G, which was bogged down till the end due to bureaucracy. Similarly, we were behind the curve in providing services like broadband internet, etc. All this could have given a boost to e-commerce and the IT sector in general much sooner.
Also, there are so many areas in the government sector that could have used IT services to be more efficient and competitive. The government never really understood the importance of the IT sector.

Anonymous said...

Thanks for pointing this out clearly and succintly. Out here in the Silicon Valley we have some well-known names spouting similar neo-liberal nonsense, with even less justification! If it were not for the US public sector (read - defense sector, national labs, the NSF etc) and myriad other forms of federal, state and local-level support the valley would still be an orange orchard (not Apples....if you get what I mean!)

Anonymous said...

Inspiring story there. What occurred after?
Good luck!

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