Government Policy of India and

Philippines

Submitted to:
Roopa Rao Mam

Submitted by:
Shruti Jain
Philippines

Few countries have as many of their citizens living abroad as the Republic of the Philippines,
or depend so greatly on migration for their economic vitality. According to the government,
more than 7.3 million Filipinos, or eight percent of the country's population, currently reside
abroad. From 1990 to 2001, official recorded remittances alone averaged 20.3 percent of the
country's export earnings and 5.2 percent of GNP, providing a lifeline for many families in a
poor country that saw little economic growth in several of those years.
For more than 25 years, export of temporary labour has been an explicit response to
double-digit unemployment rates. The government has developed a sophisticated policy
regime to promote and regulate labour emigration. Migrants, and migration, are
valued: Each year, the president celebrates Migrant Workers Day by awarding the
"Baygong Bayani" (modern-day hero) award to 20 outstanding migrant workers who
have demonstrated moral fortitude, hard work, and a track record of sending money
home.

Recent History

Although Filipinos have a longstanding tradition of migration to the United States and
elsewhere, government activism to promote labour migration from the Philippines
began in the mid-1970s, when rising oil prices caused a boom in contract migrant
labour in the Middle East. The government of dictator Ferdinand Marcos, from the
mid-1960s to the mid-1980s, saw an opportunity to export young men left unemployed
by the stagnant economy and established a system to regulate and encourage labour
outflows.
This system, which continues today, has both a private and public component. On the
private side, licenses were issued to Philippines-based agencies to recruit labour for
employers in Saudi Arabia, Kuwait, and other destinations. On the public side, the
government established the agency that would later become the Philippines Overseas
Employment Administration (POEA), in order to provide contract labour directly to
foreign employers, maritime agencies, and governments. The changes had the effect of
bringing the work of Filipinos abroad under the authority of the Philippine
government. Whether recruited privately or by the government agency, workers and
recruiters enter into a contract that is enforceable under Philippine law.
The establishment of democracy in 1986 reversed neither the Philippines' poor economic
fortunes nor its outflow of migrants. Public policy towards migration changed only
incrementally, despite increasing criticism from civil society and the Roman Catholic
Church. In 1987, the government directed the POEA to be more active in the protection of
migrant workers' rights and welfare.
In 1995, the trial and execution of Filipina migrant worker Floor Contemplacion in Singapore
turned the protection of migrants' rights into a burning political issue. The incident prompted
the government to temporarily withdraw its ambassador to Singapore, to hasten its
ratification of the UN convention of the rights of migrant workers, and to reiterate the
POEA's mandate to focus on migrant welfare and rights—measures that failed to satisfy
many of the government's critics in civil society.
The changes enacted in 1995 also expanded the POEA's mission to include promoting
the return and reintegration of migrants. However, this emphasis on return never
dismantled the overall strategy of facilitating labour migration. As recently as 2001 the
national Economic Development Plan stated that overseas employment is a "legitimate option
for the country's work-force" and outlined a four-point strategy for promoting the
employment of Filipinos abroad.
Meanwhile, the character of the labour migration has changed. Male migrants have been
joined and are now almost outnumbered by women. The "tiger economies" of Asia now rival
the Middle East as the major destination for temporary workers, while migrants who go to
North America and Oceania are far more likely to stay on as permanent immigrants. The
occupations of migrants have diversified to include professionals, factory workers, and
domestic workers, while the tradition of Filipino construction workers, sailors, and nurses
remains strong.
Government Policy

The Philippine government's goals have been remarkably clear and consistent: Migration
should be promoted, but only for temporary work via regulated channels. The results
have been mixed. The Philippines supplies an enormous amount of labour through regulated
channels: 2.9 million "Overseas Foreign Workers" were abroad under official arrangements
in 2000. However, these official, temporary flows coexist with other types of migration: The
government estimated that another 1.8 million Filipinos were abroad irregularly in 2000 and
that 2.5 million of its citizens had left for permanent residency elsewhere.
In theory, labour migration from the Philippines is a smooth process, with the
government playing a supportive and regulatory role throughout. The process begins
with securing access to foreign labour markets. The government makes temporary
labour migration a foreign policy priority in both bilateral and regional trade
negotiations. This is an employment-driven strategy—securing the rights of its citizens
to settle permanently abroad has never been a priority for the Philippine government.
Host countries that have specific labour shortages but that discourage permanent
immigration, such as many Middle Eastern countries, have been particularly good
partners in this strategy.
At the same time that the government seeks to open official access to foreign labour markets,
it also tries to prevent its citizens from using unregulated channels to migrate. In order
to leave the country to work, Filipinos must be recruited by either a licensed recruiter or a
government agency, or must have their contract approved by the POEA and enrol in the
official benefits program. In 2000, 25,062 workers went abroad on these "independent"
contracts. The government prohibits its citizens from overstaying a visa in a host country and
maintains a list of workers banned from future contracts, in part to support its efforts to
market Filipinos abroad as a high-quality "brand name" of migrant labour.
Protection of Migrants

Although the Philippine government has turned over most of the responsibility for
recruiting workers to the private sector, it retains a regulatory role, with the stated
purpose of protecting workers from abuse and discouraging illegal recruitment. In
order to be licensed, a recruitment agency must be Filipino-owned, meet capitalization
and bonding requirements, and not charge workers more than one month's salary as a
placement fee. A Philippine consulate verifies the terms of each worker's contract with the
foreign employer. Should the employer violate the terms of the contract, the Philippines-
based recruiter is held responsible through an adjudication process after the migrant returns.
Outside of the contractual relationship, the government has attempted to hold entire countries
responsible for the protection of its workers. In 2003, for example, the Philippines, along with
Indonesia, temporarily suspended new deployments of domestic workers to Hong Kong after
repeated cases of abuse. The Philippine government eventually resumed sending workers, but
continued to support lawsuits

Support to Migrants

By migrating officially, migrants receive a number of subsidized benefits: pre-migration

training on social and work conditions abroad, life insurance and pension plans,
medical insurance and tuition assistance for the migrant and his or her family, and
eligibility for pre-departure and emergency loans. Registration for these benefits, which
are administered by the Overseas Workers Welfare Administration (OWWA), is
compulsory and costs less than $200 per year. This is paid by the recruitment agency,
presumably out of the worker's wages, or directly by the migrant, in the case of
independent migrants and those whose contracts are administered by the POEA.
Remittances are a critical source of foreign exchange, and the government actively
encourages migrants to send money home. For example, the OWWA issues an
identification card to all official workers that is also a Visa card that can be linked to
dollar or peso-denominated savings accounts in a consortium of banks. The card
enables remittances to be sent at $3 or less per transaction.
Innovations such as the Visa card are the product of a slow learning process on remittances—
as late as 1985, the government, desperate for foreign exchange, was attempting to force
workers to send remittances via a mandatory remittance quota. The Philippines' history of
overvalued exchange rates had created serious deterrents to sending remittances through
official channels and the quota failed miserably. Since then, the government's policies have
been more reasonable: it has maintained a market-based exchange rate, worked to make
sending remittances via private banks cheaper and easier, and even offered tax-free
investment programs aimed at overseas workers.
Many of the support services the government provides are also intended to promote
continued ties with the homeland. The government sponsors tours of Philippine
entertainers and supports schools in areas overseas with high concentrations of
migrants. Psychological counselling services that emphasize maintenance of "Filipino
values" are offered through a network of offices abroad. Recently, the government
decided to allow overseas workers to vote in national elections, with voting theoretically
conditional upon return within two years, and committed a significant amount of money
to overseas balloting.
Since 1995, the government has also made support of the return of migrant workers part of its
policy priorities. Recognizing the propensity for migrants to return with substantial amounts
of foreign goods, the government started profitable duty-free shops for returned
migrants. Other privileges granted to returning migrants include tax-free shopping for
one year, loans for business capital at preferential rates, and eligibility for subsidized
scholarships.

Assessing Success

Migration and remittances are, however, powerful economic forces in the Philippines that
cannot be easily dismissed. Migration has unambiguously raised the income of millions of
Filipino workers and their families. It has encouraged investment in education and
training in a country where per capita gross national income was a meagre $1,030 in
2001 and unemployment rates are high for skilled and unskilled workers alike. Filipinos
overseas sent home over six billion dollars, or about 8.4 percent of national GDP, via
formal channels in 2001. Migration makes a critical difference for many families: According
to household surveys, about 17 percent of Filipino households receive remittances from a
worker abroad temporarily and these households represent 25 percent of total
household spending, figures that would rise if remittances from those who have emigrated
permanently were included.
As more and more countries look to migration and remittances to drive their economic
development, they will likely examine the Philippines' longstanding strategy of encouraging
temporary labour migration as a potential model. The clearest lesson of the Filipino
experience might be drawn from observing its evolution, and centers on the need for realism
and flexibility in migration policy.

The Philippine government has been unable to eliminate unwanted forms of emigration and
when it has adopted coercive policies toward migrants, they have largely failed. Where it has
understood the behaviour of migrants, worked with that behaviour, and given them positive
incentives and support, its policies have fared much better

India

The export sector of Indian economy made comprehensive progress over the last decade. The
exponential growth of the export sector of Indian economy can be attributed to the
liberal Government of India economic policy. Indian exports have an ambitious target
of US 160 billion in 2007-08. The achievement came to the Indian exports in the last
fiscal despite the odds against the exports, minimizing the gains. In the first two months
of 2007-08 exports grew by 20.3%, which was a little lower than the previous year over the
same period a year ago.

The Government of India latest export policy for the exporters will help in stabilizing the
export growth levels attained in the 1st quarter of 2007-2008. Ores and minerals exports
grew moderately to 12.9% against 37.4% in 2005-06. Similar trend was also observed in
the exports of manufacturing sector. The exports of manufactured goods from India
grew moderately by 15% in the first quarter of 2007-2008 as compared to 21.2% in the
last fiscal year. High value commodities like engineering goods and rice registered very high
growth rate in the 1st quarter of this fiscal against the same period last year. The overall
exports suggest that the Indian exports grew considerably across all major exporting
destinations. The Indian exports to Pakistan, UAE and Italy showed remarkable growth in the
first quarter of the current fiscal year.

The astronomical growth of the Indian export sector was led by the following industry -

• Information Technology
• Information Technology Enabled Services
• Telecommunications hardware
• Electronics and hardware
• Pharmaceutical and biotechnology products
• Consumer durables
• Textiles
• Construction machinery
• Power equipment
• Food grains
 • Iron and steel
• Chemicals and fertilizers

The robust overall growth of export sector of Indian economy led to secondary growth of the
following economic parameters -

• India's economy grew at 9.3% in quarter April-June and it was driven by

manufacturing, construction and services sector and agriculture sector
• GDP factor for the first quarter of 2007-08 was at Rs 7,23,132 crore, registering a
growth rate of 9.3% over the corresponding quarter of previous year
• Exports grew by 18.11% during the 1st quarter of 2007-2008 and the imports shoot up
by 34.30% during the same period
• India's FOREX reserves (excluding Gold and SDRs) stood at $219.75 billion at the
end of July ' 07
• The annual inflation rate was 4.45% for the week ended July 28, 2007
• India's Balance of Payments is expected to remain comfortable
• Merchandise Exports recorded strong growth
• According to reports, productivity growth rate of Indian economy is estimated to be
around 8% and above until 2020

At this stupendous growth of the export sector of Indian economy, it is expected that India
will become the second largest economy in the world after China

Exports are the major focus of India's trade policy and a thrust area is exports
involving higher value additions. Most items can be freely exported from India. A few
items are subject to export control in order to avoid shortages in the domestic market,
to conserve national resources and to protect the environment.
Export profits are exempt from income tax. Higher royalty payments of 8% (net of
taxes) are permitted on export sales as compared to 5% on domestic sales. Export
commissions up to 10% are also permissible.
Inputs required to be imported for export production are exempted from the basic
customs duty. Export Oriented Units (EOUs) and Export Processing Zones (EPZs)
enjoy special incentives such as duty free import of capital goods and raw materials for
the purpose of export production.
A Brand Equity Fund has been set up to popularize high quality India brands in the
world market. The corpus of the fund of Rs 5 billion (US $156 million) will receive equal
contributions from the government and industry. In order to meet these objectives, the
Government would follow a mix of policy measures including fiscal incentives, institutional
changes, procedural rationalization, enhanced market access across the world and
diversification of export markets. Improvement in infrastructure related to exports; bringing
down transaction costs, and providing full refund of all indirect taxes and levies, would be the
three pillars, which will support us to achieve this target. Endeavour will be made to see that
the Goods and Services Tax rebates all indirect taxes and levies on exports.
A stable policy environment conducive for foreign trade has been provided also the
government has decided to continue with the DEPB Scheme up to December 2010 and
income tax benefits under Section 10(A) for IT industry and under Section 10(B)
for 100% export oriented units for one additional year till 31st March 2011. Enhanced
insurance coverage and exposure for exports through ECGC Schemes has been ensured till
31st March 2010. We have also taken a view to continue with the interest subvention scheme
for this purpose. As part of the policy of market expansion, a Comprehensive Economic
Partnership Agreement with South Korea has been signed which will give enhanced market
access to Indian exports. Also a Trade in Goods Agreement with ASEAN that has come in
force from January 01, 2010, has enhanced market access to several items of Indian exports.
The Government seeks to promote Brand India through six or more ‘Made in India’ shows to
be organized across the world every year.

Support for Market and Product Diversification

1. Incentive schemes under Chapter 3 have been expanded by way of addition of new
products and markets.
2. 26 new markets have been added under Focus Market Scheme. These include 16 new
markets in Latin America and 10 in Asia-Oceania.
3. The incentive available under Focus Market Scheme (FMS) has been raised from 2.5% to
3%.
4. The incentive available under Focus Product Scheme (FPS) has been raised from 1.25% to
2%.
5. A large number of products from various sectors have been included for benefits under
FPS. These include, Engineering products (agricultural machinery, parts of trailers, sewing
machines, hand tools, garden tools,
musical instruments, clocks and watches, railway locomotives etc.), Plastic (value added
products), Jute and Sisal products, Technical Textiles, Green Technology products (wind
mills, wind turbines, electric operated vehicles etc.), Project goods, vegetable textiles and
certain Electronic items.
6. Market Linked Focus Product Scheme (MLFPS) has been greatly expanded by inclusion of
products classified under as many as 153 ITC(HS) Codes at 4 digit level.
7. MLFPS benefits also extended for export to additional new markets for certain products.
These products include auto components, motor cars, bicycle and its parts, and apparels
among others.
Textile Industry

The textile industry occupies a unique place in the economy of India by virtue of its
contribution to the industrial output, employment generation and foreign exchange
earnings. In 1999, the industry produced 38 billion square metres of fabric. More
importantly, exports of textiles and readymade garments now stand at over $14
billion (Rs 63,000 crore), which accounts for more than a third of India's total
exports. In terms of employment, from cotton growers to garment sellers, the
industry engages 35 million people directly across four different stages of activity.

Recent decades have witnessed the changing fortunes of the Indian textile industry. The
post-70s era has been marked by rampant fragmentation of the industry. One of the
earliest and deepest wounds inflicted on the organised mill sector came with the
emergence of the power-loom sector and processing houses. More recently,
challenges from global competitors and the prospect of a free-trade regime in a few
years will call for newer strategies and mechanisms to cope.

The organised textile industry has been entrapped in a severe crisis for the last few years.
In June 2000, the Mafatlal Industries' mill in Mumbai was shut down - the 92nd textile
mill to have shut down since April 1999 - the highest rate of mill closure since
Independence. In all, 350 mills are shut today, and the ones that aren't closed are not doing
much better.

From raw cotton to yarn to fabric to garments, every link in the textile industry's value
chain has been rusting for years.

Yarn: India is the world's largest exporter of yarn, with 25 percent share of the global yarn
market. Yarn manufacturing is the most organized and the only state-of-the-art segment of
the industry. And though it may be the most competitive segment, yarn accounts for a
miniscule proportion of global textile trade (just about $7 billion out of the $350
billion annual trade). Rather than trading in yarn, most yarn producing countries
prefer to convert it into fabric and garments which fetch much higher prices.

Weaving: Weaving is the most fragmented, outdated and troubled segment of the
industry, largely because of government policies. Fabric is produced by three kinds of
mills:

Composite Mills (mills that make yarn, fabric and some garments too; about 2,000 in
number) Power looms (over 15 lakh)Handlooms (cottage industry - thousands of them)
Such large-scale fragmentation was driven by the objective of creating employment:
power looms can be set up anywhere with minimal investments. The government
granted to power looms, many discriminatory benefits - less than 50% excise duty
levied on mill cloth, subsidised power and water and exemption from octroi. The cost
of producing one metre of cloth by a power loom is 0.22 paise, compared to RS 1.60
in a composite mill. Subsidies to power-looms have made composite mills sick.

But now, the attention has shifted from employment generation to competitiveness. Most
power looms are too small and too technologically outdated to produce quality fabric
at competitive prices. Consequently, India has a miniscule 3.2 percent share in the
global fabric market. Even countries like Bangladesh have rejected Indian fabric for
its poor quality.

Readymade Garments: Garment making in India is reserved for the small-scale sector - no
garment manufacturing unit can have an investment of more than RS 3 crore. The
exclusion of big corporate from garment making is one reason why India's share in the
global garment market is just 2 percent (or $5.5 billion). In contrast, China, from 1990-98,
through large and integrated garment factories, had raised its share in the global garment
market from 9 percent ($9.4 billion) to 17 percent ($30 billion) and is now the world's
largest exporter of apparel. Even Sri Lanka and Mexico are benefiting by following this
model.

The Indian textile industry's presence in international trade is already very low. The share
of Indian textile and clothing industry in global export trade of over US $350 billion is just
about 3 per cent as against china's 12.5 per cent, almost 26 per cent together with Taiwan.
Presently, Indian exports enjoy some amount of protection under the quota system of
textile trade, but this comes to an end on December 31, 2004. Falling trade barriers will
unleash a flood of imports of cheaper and better fabric and garments into India, and will
also make the export market far more competitive.

In the free-trade regime, Indian textiles may not only lose some of their foreign markets,
but they would also face tremendous foreign competition in the domestic market. From the
levels of 100-150 percent in the early 1990s, customs duties on textiles have fallen to 20-
35 percent and further reductions are due in the next three years. As customs duties are
scaled down, excise duties and other domestic taxes, too, will have to be brought down to
provide an even field for the domestic industry.
Information Technology

It's the technological revolution that at times brings surprising opportunities for some nations.
India, though not among the front runners in terms of economic growth, has successfully
utilized such opportunities in the revolution to become an IT hotspot. For the past several
years, India has been an increasingly favoured destination for customized software
development. As a result, a number of software companies in India have come up. Not only
the number of players has increased in the Indian IT market, but at the same time, Indian
software companies have done considerably well in the global market. Such huge success of
software companies in India has given birth to a new speculation – whether other developing
countries should imitate Indian example and whether the success of India would constitute a
competitive challenge to the software industry of the developed world or not.

The Software Industry in India

With the huge success of the software companies in India, the Indian software industry
in turn has become successful in making a mark in the global arena. This industry has
been instrumental in driving the economy of the nation on to a rapid growth curve. As
per the study of NASSCOM-Deloitte, the contribution of IT/ITES industry to the GDP
of the country has soared up to a share of 5% in 2007 from a mere 1.2% in 1998.
Besides, this industry has also recorded revenue of US$ 64 billion with a growth rate of
33% in the fiscal year ended in 2008.

The export of software has also grown up, which has been instrumental in the huge
success of the Indian software companies as well as the industry. In fact, software
export from India accounts for more than 65% of the total software revenue. The
domestic software market largely depends upon sale of software packages and products,
which constitute major part of revenues. Products account for almost 40% of the
domestic market. On the other hand, more than 80% of revenue from software exports
comes from software services like custom software development and consultancy
services etc.
Reasons behind Success of Indian software companies

There are a number of reasons why the software companies in India have been so successful.
Besides the Indian software companies, a number of multinational giants have also plunged
into the India IT market.

India is the hub of cheap and skilled software professionals, which are available in
abundance. It helps the software companies to develop cost-effective business solutions for
their clients. As a result, Indian software companies can place their products and services in
the global market in the most competitive rate. This is the reason why India has been a
favorite destination for outsourcing as well. Many multinational IT giants also have their
offshore development centers in India.

The Indian software industry has a unique distinction in that most of its output is exported. Of
the turnover worth US $2 billion, over 50 per cent is accounted by exports. The CAGR
(Compounded Annual Growth Rate) for the Indian software industry in the last five years has
been 52.6%. CAGR for the software export industry has been 55.04% while that for the
domestic industry has been 48.9%.

There has been a shift towards offshore services in the software export cargo of India.
The bulk of Indian software exports have been in the form of professional services. A
detailed analysis indicates that majority of software exports are in the areas classified as
"customized" or "professional consultancy". However, since last two years, there has
been a visible shift towards off shore project development, which also includes offshore
package development has increased to over 41% during the year. Reasons attributed
for this growth are increasing number of Software Technology Parks, liberalised
economic policy and unnatural visa restrictions by U.S. and some Western European
countries

The degree of on-site development is still very high, with as much as 44% of the work being
done at the client's site, but it is expected to decrease further in the coming years with
improved data communication links.

Development focus of the Software Exporters

Nearly two thirds of the companies are engaged in developing end-user application products
and services ranging from straightforward accounting systems to specialised niche market
products or customised services. The rest obtain their revenues from consultancy, systems
integration, supply of specialised software systems, such as software tools, communications
software and software for dedicated hardware devices.

Marketing is the most critical issue for the development of the Indian software Industry. The
size of the Indian software export industry is very small compared to the world market. To
emerge as a major player in the world software market, there has to be a significant
expenditure on marketing. In India, the software vendors operating in the export market have
traditionally depended upon direct marketing to end-users. However lately, many software
companies have set up their own offices in various countries.

The term liberalisation is used to encapsulate the significant shifts in India's economic
policies, shifts that have occurred on a number of fronts. The government has by altering
its policies regarding trade in computer equipment, software, and FDI in information
and communication activities, removed blockages to growth in the use of information
technology.

Consistent with the protectionist views towards industry, India's software policies before
1984 were consistent with a model of state-led planned development. In the mid 1980s, a
guided and guarded economic liberalisation took place that emphasised both greater access to
imports and the promotion of software exports while still closely regulating the domestic
computer and software industries. However, it became clearer in 1991 with the state slowly
getting out of the way. In fact in India, economic liberalisation was combined with policies to
encourage and direct the introduction, adoption, and use of information technologies and to
advance national capabilities. Of particular importance in this regard are the evolution of
policies:

• to promote the software industry and software exports through deputation

contracts,
• to enhance information resources and human skills relevant to information
technologies,
• to shift the composition of software exports, and
• to capture a higher value added segment of the global software industry.

A brief history in time - Software Policy prior to 1984

Over the past 45 years, Indian political and technical think tanks sought to achieve economic
growth, modernisation, and industrialisation through state direction of investment and the
substitution of nationally produced products and services for actual and potential imports.
The Planning Commission identified priority areas for public and private investment in five-
year development plans. Although the electronics and computer sectors were not emphasised
as much as the role of manufacturing in Indian development plans, these areas were
increasingly discussed beginning in the late 1960s and early 1970s. Following the
recommendations of Bhaba Committee, the Electronics Commission and the Department of
Electronics (DoE) were instituted in 1970. These became the primary agencies for the
development of India's IT strategy.

.
1984-1990: Guided and Guarded Liberalisation

The term sea change is widely used to describe the significant policy shift that began to occur
in discussions leading up to the computer policy of November 1984. Only one month after
Mr. Rajiv Gandhi became the Prime Minister, the computer policy resolved a number of
ongoing debates. The new policy was prompted by a number of emerging conditions in
global computer services markets. The growing world demand for data processing and
software services was seen to present the opportunity for Indian companies to sell computer
software and services abroad. According to some, India could leapfrog the industrial age,
going from being an underdeveloped agrarian economy directly to becoming an information
economy in an information revolution.

The 1986 software policy had the objectives of radically expanding Indian software exports
and of changing the composition of software exports. It had the following objectives:

• to promote software exports to take a quantum jump and to capture a sizeable share
in the international software market,
• to promote the integrated development of software in the country for domestic and
export markets,
• to sirnplify the existing procedures to enable the software industry to grow at a faster
pace,
• to establish a strong base for the software industry in the country,
• to promote the use of computers for decision making, and
• to increase work efficiency.

The measures designed to facilitate the achievement of these objectives included:

• Liberalisation of access to imported inputs required by software firms

• De-licensing of production capacity for computers and electronics equipment.
• A shift from the state-led development of the national software and computer
industry towards a greater role for the Indian private sector
• Allowing solely owned foreign firms to operate 100% export-oriented units within
India
• Better access to telecommunications services
• Reduction of import tariffs and income taxes
• Assistance in the training and education of computer software personnel.
 • A shift towards a national focus for tighter integration with international computer
service corporations and global services markets.

A number of national agencies, programs, and policies operating in a market context were
initiated to facilitate the achievement of software export objectives. These included:

• Software Development Agency in the DoE,

• A series of software technology parks that provided the telecommunication
infrastructure needed by the software companies,
• Organisation of software export seminars by the trade Development Authority and
• The creation of the electronics and Computer Software Export Promotion Council,
the latter two being sponsored by the Ministry of Commerce.

By 1990, there were several major forms of software exports from India. The overall volume
of exports of software and services during 1989-1990 was estimated to be around $110
million, up from $26 million in 1985 before the software policy was introduced. The majority
of exports - around 80% - were in the form of deputations, on-site consultancy, professional
services, or body shopping. Software and service exports also included projects consultancy
or turkey projects - wherein the overall management of the work was in the hands of the
Indian consulting firm rather than of the client - that comprised around 15% of exports.
Analysts argued that further export growth were to be sought in the areas of software
development based on clients' specifications, Indian based software export operations,
systems maintenance and service (outside India), and training students and retraining
professionals.

Industry Evaluation of Software Policy in 1990

Among the policy questions facing the Indian government were:

1. The appropriateness of the policy's objectives.

2. The importance of altering the composition of software exports.
3. The nature of liberalisation, government support or other policy changes required in
order to achieve those objectives.

Altering the composition of Software Exports

A second policy question related to the necessity of efforts to alter the composition of
software exports. Under existing conditions, a low portion of the value-added in the world
software industry was captured by Indian firms, whose workers might be involved in tasks
such as coding or testing software rather than in managing projects, the design of software, or
the integration of different computer and software systems. Over the long term, Indian
companies ran the risk of becoming stuck in the low technology and low value added
activities of world software production, such as writing code or conversions of existing
software programs to work with new computers or operating systems.

In 1990, a number of steps were identified by industry representatives, whereby Indian firms
could shift the composition of software exports. These included:

• developing long term relationships with clients,

• building connections with foreign affiliates,
• developing software for hardware manufacturers prior to the release of new
equipment,
• setting up corporate service centres in India, and
• constructing alliances among Indian software services and other activities such as
engineering or accounting in order to develop niche specialisation's.

At that time, many difficulties were recognised in efforts to alter the composition of exports.
As a nascent industry, many Indian software firms lacked the necessary experience in
management skills. India was also geographically remote from important world markets,
making it difficult to build relations with prospective clients. However, alongside these
difficulties, there were significant advantages in bringing work back to India for Indian based
software export operations. These advantages included the lower costs of living and the
opportunity to remain within their own culture and lower administrative costs for contracts.
Large geographic distances also allowed for the remote use of clients' computing facilities via
telecommunications while it was night time in the West, reducing costs and expanding the
use of clients' computer resources.

Nature of liberalisation, government support or other policy changes required

Several policy changes on the part of the Indian government to allow greater access to
foreign inputs such as computers, software, and training were therefore necessary to facilitate
the achievement of these goals.

The areas in which the need for policy changes was especially emphasised were:

• necessity of obtaining import licenses for equipment,

• continuing tariffs on imported software under the open general license scheme,
• high export performance commitments to offset the foreign exchange cost of foreign
equipment, and
• improved availability, quality, and price of inputs obtained within India.
The development of stronger national and international protection for intelligence for
intellectual property rights was also seen as essential to the development of the software
industry. Foreign software firms that might send work to India were hesitant to do so if they
could not be sure of the protection of their proprietary rights.

Policy 2003-07

a. To give a boost to electronic hardware industry, supplies of all 217

ITA-1 items from EHTP units to DTA shall qualify for fulfillment of export
obligation.
b. To promote growth of exports in embedded software, hardware shall
be admissible for duty free import for testing and development purposes.
Hardware upto a value of US$ 10,000 shall be allowed to be disposed off
subject to STPI certification.
c. 100% depreciation to be available over a period of 3 years to computer
and computer peripherals for units in EOU/EHTP/STP/SEZ .

Bibliography

http://www.migrationinformation.org/feature/display.cfm?ID=191

http://edm.iboninternational.org/component/content/article/413-special-features/250-labor-
export-policy-of-developing-countries-the-case-of-the-philippines-and-indonesia

http://www.migrationinformation.org/USFocus/display.cfm?ID=364

http://www.atrkimeng.com/news.php?action=news&id=43

http://business.mapsofindia.com/software-companies-india/

http://exim.indiamart.com/indian-exim-policy/exim-policy-2003-highlights.html