Excerpted from ‘The Maverick Effect: The Inside Story of India’s IT Revolution’, by Harish Mehta, with permission from HarperCollins India.
In 1991, the government had commissioned the World Bank to study the potential of India’s software industry. NASSCOM was part of this exercise. The study’s report and recommendations were a turning point in the history of Indian IT. Among many things, the report compared the potential of countries competing for a slice of the global software market. One measure was on a scale that quantified a country’s ability to communicate with other countries. India scored a -2. The much smaller Ireland scored +8. The government got the message.
Besides connectivity, the IT industry was forever scurrying around in a maze of regulations set by the city, state and central governments. We used to visit [Nagarajan] Vittal [Secretary] at the DoE regularly. He made extra efforts to understand our issues holistically and was keen to solve them all.
During my tenure as the chairperson of NASSCOM, in one of the meetings with Vittal, he told us about what he did in an earlier assignment at the Kandla Port at Gujarat.
It was a seaport, addled by regulations of all kinds, including a heap of them from the local government. To make it easy for the businesses there, he began meeting a few ministers. But his masterstroke was by working towards declaring the port as a ‘special economic zone’, way before that concept had come to India. In many industries, city- and state-level regulations stifle businesses.
This enabled entrepreneurs to now find a way around the Gujarat state regulations and other myriad central government regulations.
At the end of his story, he asked us: ‘What if I do something similar for your industry?’ We were excited on hearing the concept.
We knew that the discussions with the policymakers and government would span months. Thus, to build trust with bureaucrats (as was our core tenet at NASSCOM), it was clear from day one that the body must have the policy to allow anyone from the government to attend any of our EC meetings without prior intimation. We implemented the same and this led to freewheeling discussions between the industry and the government, where plans evolved continually before coalescing into a final scheme.
Vittal knew the power structure in Delhi and needed to make a compelling case for the scheme. This is where NASSCOM came in, and armed him formidably with numbers and research papers. At the time, the industry turnover was only $150 million. But we had dared to stretch our imagination and extrapolate the value of software exports to $500 million. Of course, we were grossly off the mark. Just a few years later, we were, in fact, magnitudes bigger than imagined.
Finally, Vittal coined the term ‘Software Technology Parks of India’ (STPI) and got it approved by the ministerial cabinet. Traditionally, Indian manufacturing units have been set up a little away from cities, where land is abundant and environmental regulations can be relaxed. The government had adopted the same approach for the STPIs too. They didn’t consider that the talent for the software business was in the cities and that programming caused no pollution. There was no reason for planning an STP facility at Keonics, a distant suburb of Bangalore, or at Talawade, far away from Pune. In the beginning, if we wanted the STPI benefits, we had to work out of those distant buildings. Like I said earlier, we eventually convinced the government to let any building anywhere in a city be allowed to fall under the STPI scheme. Later, state governments, too, were allowed to set up parks under the scheme.
India desperately needed foreign exchange, and the government was determined to help us earn it. IT entrepreneurs needed to spend in dollars on sales, marketing and the setting up of offices abroad. The tax holiday allowed IT entrepreneurs to plough their profits back into their businesses, which further accelerated the industry’s growth. It also started up many software services businesses. Just this one government initiative made all this possible.
The STPI idea eventually came through, and all key issues were solved in less than two years. The parks helped us overcome the struggle to clear paperwork with the bureaucracy. It provided a single-window clearance mechanism for several processes, which greatly streamlined IT businesses. An STPI officer was assigned to each office to protect the government’s interests and make sure we were not violating the laws. The officer was authorised to clear most documents. So, instead of going to the customs office, we could just pass it through our own office. The officer had the right to question what we were sending out as export data and what was coming in for us. Import duty exemptions were granted as well, and the smoother movement of computers and electronics was made possible. The government began shouldering many expenses. With time, these costs were brought down to a minimum.
Every park had a dedicated 64 kbps line that anyone could share. By then, VSNL’s earth stations and the SEA-ME-WE 2 deal had the data lines flying too. In fact, the STPIs and VSNL were competing with one another. That brought down the costs and improved quality. After many incremental improvements in infrastructure, data transfer had suddenly stopped challenging us. [Brijendra Kumar] Syngal made VSNL turn over a new leaf. It could now deliver a 64 kbps line in a snap, as compared to the months of wait earlier. Sometimes, within seventy-two hours. All companies, large or small, were now connected with their clients abroad. We even had multiple lines available and could confidently bid for larger projects without worrying about connectivity! The offshoring revolution was underway.