Valedictory Address by Dr. Shashi Tharoor, Minister of State for External Affairs at the India IT Summit

It is a privilege to participate in the valedictory session of the India IT Summit being organized by the Confederation of Indian Industry and the Government of Kerala. At the outset, I would like to thank the CII and the Government of Kerala for giving me this honour and the opportunity to address this distinguished and knowledgeable gathering. I am sorry that I was unable to be here earlier to benefit from your discussions over the last couple of days.

2. Information Technology has given India impressive brand equity in the global market. It has raised the profile of the Indian economy and today India's strength in the IT sector is recognized the world over. Major advantages in talent, our skilled workforce, our improving urban infrastructure, a conducive business environment, favourable policy interventions by the Government and continuous robust growth in the domestic IT sector have made India a world leader in the global IT and BPO industries sector. Through the joint efforts of the Government and industry, software development and IT enabled services have emerged as niche opportunities for India in the global context.

3. This is why I suppose I am here, since my Ministry is not directly concerned with the major issues before you all. Indeed, our economic reforms are a major calling-card for India abroad. And yet all too often India’s economic reforms remind me of the old saying about Indian diplomacy: it used to be said that Indian diplomacy was like the love-making of an elephant – it was conducted a very high level, accompanied by much bellowing, and the results are not known for two years. The same is true of many Indian economic reforms, which are promulgated from on high with much fanfare and then take an age to be implemented because of all the vested interests and obstacles that have to be overcome. But this is not true, and has never been true, of the IT sector, where we got it right from the start and where little reform has been needed because IT has been on the cutting edge internationally.

4. The Indian information technology industry has grown at a phenomenal pace over the last decade. Despite the global economic crisis, the IT-BPO sector grew by 12% in 2008-09 to reach US$ 71.7 billion in revenue (including hardware). Of this, software and services accounted for US$ 59.6 billion. The top three IT companies, namely, Infosys, TCS and Wipro, saw revenue growth from all important sources of income in 2008 and 2009. This growth was fuelled by increasing diversification in the geographic base and adaptation in their portfolios of service offerings. While the effects of the economic crisis are expected to linger on, the Indian IT-BPO industry has displayed remarkable tenacity and resilience in countering the unpredictable conditions and reiterating the viability of India's fundamental value proposition.

5. IT also plays a far more significant role in our economy than ever before. In terms of its share in GDP, revenue from the Information Technology sector has risen from 1.2% of GDP in 1997-98 to an estimated 5.8% of GDP in 2008-09. The sector's share in total Indian exports increased from less than 4% in 1998 to almost 16% in 2008. In terms of value, our IT-BPO exports, including hardware exports, grew by 16% from US$ 40.9 billion in 2007-08 to US$ 47.3 billion in 2008-09.

6. This growth in the IT sector has been possible through a combination of factors, including the inherent advantages of the Indian economy, innovative entrepreneurship on the part of Indian industry and Government interventions in the form of liberalization of foreign investment and export-import policies. Visionary leaders like Narayana Murthy of Infosys and Azim Premji of WIPRO have put India in the forefront of the IT revolution. Major international companies like Microsoft, Intel, Dell, IBM, Cisco and GE have started their production bases in India. Our brilliant IT professionals, who are not only leading the growth of the Indian IT-BPO sector but also of major multinationals like Microsoft and IBM, have made India proud.

7. As a result, IT has made its own contribution to India’s soft power. When Americans speak of the IITs with the same reverence they used to accord to MIT or Caltech, and the Indianness of engineers and software developers is taken as synonymous with mathematical and scientific excellence, it is India that gains in respect. Sometimes this has unintended consequences. I met an Indian the other day, a history honours student like me, who told me of transiting through Schiphol airport in Amsterdam and being accosted by an anxious European saying “you’re Indian! You’re Indian! Can you help me fix my laptop?” The old stereotype of Indians was that of snake-charmers and sadhus; now every Indian abroad is assumed to be a software guru or a computer geek. This is all thanks to the global success of IT professionals.

8. Indian IT companies have also started making strategic investments abroad. Notable ones include: HCL Technologies entering into a strategic partnership with South Africa’s UCS Group to acquire UCS’s enterprise solutions SAP practice (focused on the retail sector), and software services firm MindTree making a foray into China, having bagged a significant outsourcing contract from China’s biggest telecommunications equipment maker, Huawei Technologies.

9. Global trade in services has entered a new era with the growing and widespread acceptance of the IT-based global delivery model. With the availability of international bandwidth and powerful work-flow management, the IT software and services sector today is penetrating the fabric of society in every sphere. It is now possible, as Tom Friedman so vividly demonstrated in his book The World is Flat (itself inspired by a remark by our mutual friend Nandan Nilekani), to disaggregate any business process, execute the sub-processes in multiple centres around the world and reassemble them in near real time at another location. India has already made its mark on the global IT-BPO sector. India continues to be the nerve centre for global sourcing with over 2/3rds of the Fortune 500 and a majority of the Global 2000 firms leveraging global service delivery and sourcing from India.

10. India remains the most preferred destination for companies looking to offshore their IT and back-office functions. It also retains its low-cost advantage and is among the most financially attractive locations when viewed in combination with the business environment it offers and the availability of a skilled workforce. But India is not only about price advantages; we provide better quality at a lower price. Recognizing the need to provide qualified and trained manpower in this sector, the Government has already started 6 new IITs in 2008-09 and is in the process of setting up 30 new Central Universities, 10 new National Institutes of Technology, 20 new IIITs and 5 new Indian Institutes of Science.

11. The Government has taken several steps to promote the IT sector including allowing foreign direct investment under the automatic route, reduction in customs duties, abolishing customs duty on 217 items under the Information Technology Agreement, reduction in excise duty, simplification of procedures, special incentive packages for setting up IT related industries in India, liberalization of the foreign trade policy for electronics and IT products, promotion of R&D and development of entrepreneurship through assistance to institutions of higher learning to strengthen their technology incubation centers enabling young entrepreneurs to establish start-up companies.

12. In order to tap the resources of the leading national Institutes for collaborative research, the National Knowledge Commission has recommended the setting up of a high-speed digital broadband network throughout the country, with adequate capabilities and access speed. The primary objective of the Network is to provide gigabyte broadband connectivity to all institutions of higher learning and research in the country.

13. The IT Act of 2000 dealing with cyber security, cyber crime and other information security-related legal aspects has been enacted to encourage expansion of e-commerce through internet. The Data Security Council of India (DSCI) was launched in 2007 to institutionalize efforts to further enhance the information security environment in India. India is only the 12th nation globally to enact cyber laws.

14. India has not lagged behind in the High Performance Computing (HPC) arena. The Centre for Development of Advanced Computing (C-DAC) has developed in-house expertise for design and development of parallel processing technology based HPC systems, application development environments, system software tools and utilities, as well as development and porting of applications. C-DAC’s PARAM series of HPC systems have 60 installations worldwide. C-DAC has set up a nationwide grid of HPC systems named ‘Garuda’, which enables collaborative R&D among HPC user community in various sectors of Science and Engineering.

15. While IT continues to be a major engine of growth for the economy through its contribution to GDP, exports and employment, our vision is to use IT as a tool for raising the living standards of the common man and bring Government services to the citizen's doorstep. Towards this end, Government has undertaken a massive programme of PC and internet penetration in the rural and under-served urban areas. To provide IT access in rural areas, the Government is implementing a Scheme for establishing State Wide Area Networks (SWANs) across the country which envisages providing technical and financial assistance to States for establishing SWANs from State Headquarters up to the Block level with a minimum bandwidth capacity of 2 Mbps.

16. In May 2006, the Government approved a National e-Governance Plan (NeGP) comprising 27 mission mode projects and 8 components, providing an important platform to upscale and integrate various e-governance initiatives at the Local, State and Central level. The key mantra of e-governance is “citizens first”. It goes beyond computerization of government processes and into the realms of good governance which include issues of efficiency of service delivery, empowerment of citizens, transparency and accountability. In this context, the Ministry of External Affairs has undertaken a major public private partnership initiative called the Passport Seva Project that will enable people to apply for passports on-line. The project is expected to become operational next year and is expected to result in the issue of passports within 3 days, and where police verification is required, within three days of completion of the verification process.

17. On the international front, India is providing technical assistance in the IT sector to various developing countries in Africa, Asia, Latin America and East Europe. Given India's strength in the IT sector, a number of countries have indicated their preference to set up IT training centres and institutes with Indian assistance. India has already set up five such centres of excellence in Cuba, El Salvador, Nicaragua, Honduras and Jamaica and six centres are in the pipeline in Grenada, Syria, Benin, Ecuador, Costa Rica and Cape Verde. Our assistance has included sending IT experts to run these centres for a period of two years and providing hardware and software for conducting training programmes. The centres are eventually handed over to the partner countries as an important resource for capacity building in these countries.

18. There is also a large interest among developing countries for more and more IT related courses under our ITEC programme. One-third of our total training slots numbering 1695, out of a total of 5000 slots offered to foreign countries during 2009-2010, are in the IT sector. Similarly, 1/4th of the total courses i.e. 52 out of 200 courses during the current financial year are IT related. This is indicative of the interest among ITEC participants from our 158 partner countries, in IT and IT related vocational training.

19. India's economic boom, combined with the exponential growth of its IT and knowledge industry sectors, offers numerous opportunities for our neighbouring countries and the world; as a growing market and services centre. IT companies like Infosys, TCS, and WIPRO have hired hundreds of software engineers from across the globe and have ambious future plans.

20. The Indian IT sector is expected to continue its rapid growth in future. Our IT-BPO exports are expected to cross the US$ 60 billion target by 2011. Present employment of 2.23 million professionals in the sector is expected to increase to 2.5 to 3 million in the next 2 years thereby contributing substantially to the socio-economic development of the country. On a longer term, revenue from IT exports is expected to reach US$ 175 billion by 2020 while revenue from the domestic market is expected to contribute US$ 50 billion by 2020. Together, the export and domestic markets are expected to generate revenue of US$ 225 million by 2020 as opportunities emerge in new sectors and more and more economies rely on outsourcing (at least according to the NASSCOM - McKinsey Report).

21. The Indian IT-BPO industry is now at a critical point in its evolution. With a decade of impressive performance, it has to move forward in a new transformed macro-economic environment, rapidly changing customers and needs, evolving services & business models and rising stakeholder aspirations. India, with its fundamental advantages, can capture a large share of the immense opportunities available. However, to achieve this goal amidst current and future challenges and maintain our leadership position in this sector, concerted efforts are required by all key stakeholders, including industry, government and academia to work together for optimum results. Since the sector faces tough competition from other emerging economies, India will have to rely more on providing innovative indigenous solutions to increase business productivity rather than just provide services as per client specifications. In other words, Indian industry will have to take a lead and be more pro-active rather than be driven by global demands. This will also synergize with India reaping the benefit of its demographic dividend and its focus on emerging as a global economic super power by 2020.

22. In the 21st century, a country's soft power will be the defining feature of its global influence and reach. The Indian IT industry has built a strong reputation of excellence and high standards of service quality and information security. Indian software companies have earned the unique distinction of providing efficient software solutions with a cost and quality advantage by using state of the art of technology. There is, now, a need to build on our existing strengths and focus on future strategies for growth.

23. This would include research to develop indigenous software in new usage of IT technologies like cloud computing, out-of-the-box solutions, etc. This will also help Indian IT industry in playing a more active role in setting global IT standards. There is already a huge repository of codes in the form of open source software which can be harnessed to provide alternatives to imported software. A concerted and combined effort needs to be made by the Indian IT industry as a whole in this direction. On the internet connectivity front, India needs to work much harder to provide internet accessibility to a larger part of our population. At present, there are 60 million internet users in the country. The Manufacturer’s Association of IT (MAIT) has outlined 'Goal 511', an ambitious target to increase the number of internet users to 500 million, and provide 100 million broadband connections and 100 million connected devices by 2012. Similarly, with the growing use of IT in all spheres of everyday life, IT security has come into prime focus and is of crucial importance. In view of the ongoing incidents of cyber warfare, Indian industry can play a major role in protecting India's IT assets and infrastructure by developing our own IT security products. Through a policy of sustained R&D in cutting edge technology, we must aim to further increase and broad base our exports while also expanding the domestic market.

24. The future holds immense potential for the IT sector requiring a focused and coordinated approach. I wish the CII and the IT industry all success in its future endeavours.

Thank you.

Thiruvananthapuram(Kerala)
December 11, 2009

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