Indian software industry is of recent origin. It has been growing since signing of international treaty in1994 by Indian government. Since then, India has been emerging as one of the major giant in the field of Information Technology Enabled Services (ITES) and Business Process Outsourcing (BPO). According to National Association of Software and Services Companies (NASSCOM), IT Business Process Outsourcing (BPO) sector has been contributing 7.5 per cent of India’s GDP, 25 per cent of India’s total export and 10 per cent of total service sector revenue in 2010-11. IT services is the fastest growing segment among the others, it has been growing by 22.7 per cent, and generating export revenue (including hardware) of $69 billion. The share of software service exports from India was recorded around 58 per cent of the total global software service exports in 2011-12.
This study is conducted to explore the contribution of Indian software firms in the development of Indian economy since its inception along with it emergence as one of the new industry on the map of Indian corporate and the world. We identify the challenges faced by these industries in general and issues in financing of these firms particular. For this task, we organize the present study into eight chapters.
This study explores the drivers of Indian software industry growth, for that we run linear regression. We empirically test the impact of new economic reforms on the Indian software industry. Using the various econometric techniques, before and after the introduction of economic reforms period growth rate is compared to know whether there is any change in the growth story of the Indian software firms during the reforms period. Present study reviews the employment growth in Indian IT-BPO firms and also tests empirical relationship between export revenue of IT-BPO firms and employment growth in software industry. Main focus of the study is to find out the issues in financing of the new economy firms in India. In the broad perspective, this study is pursued for finding out which sources of finance are being tapped by these firms for financing themselves.
In order to test hypotheses relating to drivers of software industry growth in India, regression I and II have been run and results appeared thereof shows that the coefficient values of the variables, money supply (M3GDP), domestic capital formation ( DCGDP), opening of economy (OPGDP) and stock foreign exchange (FRGDP) are significant at 10%,
Table of Contents
1 Introduction
1.1Backgroud
1.2 Rational behind the Study
1.3 Objectives of the Study
1.4 Hypotheses
1.5 Study period and Data Sources
1.6 Methodology
1.7 Organization of the study
2 Literature Review
2.1 Introduction
2.2 Studies on development of software firms across the world and India.
2.3 Literature on Financing of Firms and Determinants of Capital Structure
2.4 Conclusions
3 An Analytical Review of Indian Software Industry
3.1 Introduction
3.2 Nature of New Economy Firms
3.3 Origin and Development of Indian Software Industry
3.4 Policies of Government for Promoting Software Industry
3.5 Role of Industry Organization NASSCOM
3.6 Distribution of Domestic IT Market
3.7 Overview of the Talent Pool Available In India
3.8 Conclusions
4 An Empirical Study of the Drivers of Software Industry Growth in India
4.1 Introduction
4.2 Drivers of Software Industry
4.3 Data Used for Analysis
4.4 Methodology and Model Used
4.5 Results and Discussion
4.6 Conclusions
5 Empirical Analysis of Growth of Software Industry during the Reforms Period
5.1 Introduction
5.2 Share of Software Services into Total Exports from India and Proportion of GDP
5.2.1 World of Software into Total Software Export
5.2.2 World Market for Computer Software and Services Export
5.2.3 Exporter Computer Services (Top 10 Firms)
5.3 Activity Wise Distribution of ITES/BPO Services
5.4 Trends in Software Growth of Software Industry in India
5.4.1 Indian Software Industry Growth Before and after Liberalization
5.4.2 Result Analysis and Discussions
5.4.3Testing Parameter Stability: Chow Test
5.5 Structural Changes in the Software Earning Regression
5.5.1 Unit Root Test
5.5.2 Phillip Perron Unit Root Test
5.5.3 Cointegration
5.5.4 Model Stability and Interpretation of the Results
5.6 Conclusions
6 Investigation of Employment and Export Earning Relationship in India
6.1 Introduction
6.2 Growth of IT-BPO Sector in India
6.2.1 Trends In IT-BPO Revenue and Employment
6.2.2 Indian Software Exports by Destination
6.3 Literature Review
6.4 Methodology and Data Analyisis
6.5 Conclusions
7 Trends and Issues in Financing of Software Firms in India
7.1 Introduction
7.2 Objectives, Data and Methodology
7.3 Background of the Study
7.3.1 International Studies
7.3.2 Domestic Studies
7.4 Trends in Financing of the Indian Software Firms
7.5 Financial Position of Indian Software Firms
7.5.1 Mean Comparison Test
7.6 Conclusions
8 Conclusions and Policy Suggestions
8.1 Introduction
8.2 Major Findings of the Study
8.2.1 An Analytical Review of Indian Software Industry
8.2.2 Role of Drivers of Software Industry
8.2.3 Empirical Testing of Impact of New Economic Reforms
8.2.4 Empirical Relationship Between Export and Employment in Software Industry
8.2.5 Issues in Financing of Software Firms
8.3 Policy Implications of the Study
8.4 Limitations of the Study
8.5 Scope for Further Study
Research Objectives and Focus
This study aims to investigate the contribution of Indian software firms to economic development, evaluate the impact of economic reforms on their growth, and identify the critical challenges these firms face regarding financing and operational infrastructure.
- Origin and development of the Indian software industry.
- Impact of economic reforms on industry growth and export earnings.
- Empirical relationship between IT-BPO export revenue and employment generation.
- Analysis of financing patterns and capital structure of Indian software firms.
- Policy recommendations for supporting the sustained growth of the software sector.
Excerpt from the Book
1.1 Background
Middle class people can do a business with modest capital although they have no legacy of business. Majority of Indian software firms were started by first generation entrepreneurs. Later on some of the firms did wonders in their adventure and acclaimed name and fame across the world. Presently, Indian IT sector has become a trusted brand in the world. To gain this status, Indian software industry has gone through a stage of start-up stage to maturity in the last 25 years. Since 1994, India has been emerging as a major giant in the field of Information Technology Enabled Services (ITES)/ Business Process Outsourcing (BPO). According to National Association of Software and Services Companies (NASSCOM), IT Business Process Outsourcing (BPO) sector contributed 7.5 per cent of India’s GDP, 25 per cent of India’s total exports and 10 per cent of total service sector revenue in 2010-11. IT services was the fastest growing segment among the others, growing by 22.7 per cent, and generating export revenue (including hardware) of $69 billion. The share of software service exports from India remained around 58 percent of the total global software service exports.
IT sector has given take off to the India’s service sector (Gordon and Gupta, 2004). This industry has generated employment of 230,000 jobs in 2012, thus it provides direct employment to about 2.8 million, and indirectly it has given employment to 8.9 million people in India. Indian Domestic Hardware market crossed Rs 615 billion in 2012. It is driven by increasing market for notebooks, net-books, tablet computers, mobility devices, improved connectivity tools, etc.
Domestic customer base in India comprises of the government, large, micro, small and medium enterprises. Household sector consumers represent unique set of requirements. Accordingly, Suppliers and manufacturers are realigning themselves to suit India specific needs and innovating new ways to target Indian customers. Direct employment within the domestic IT-BPO sector has been growing above 7 per cent in 2011 and crossed 600,000 employees. This industry has been offering job opportunities in Tier I, Tier II and also expanding in Tier III cities in the recent period with direct and indirect job opportunities. These IT hubs are expanding at a rapid speed. The Indian IT-BPO industry has proved to be a premier source of mass employment across the country.
Summary of Chapters
1 Introduction: Provides the background and rationale for studying the Indian software industry, defining key research objectives and hypotheses.
2 Literature Review: Synthesizes academic literature on the development of software firms and corporate financing theories.
3 An Analytical Review of Indian Software Industry: Examines the origin, development, and current state of the software industry in India, including the role of government policy and NASSCOM.
4 An Empirical Study of the Drivers of Software Industry Growth in India: Uses econometric models to analyze macroeconomic and non-economic factors influencing industry growth.
5 Empirical Analysis of Growth of Software Industry during the Reforms Period: Assesses the impact of economic reforms on industry performance using structural change analysis.
6 Investigation of Employment and Export Earning Relationship in India: Explores the quantitative link between IT-BPO export revenues and employment intensity.
7 Trends and Issues in Financing of Software Firms in India: Investigates how new economy firms raise capital and the constraints they encounter in the domestic financial environment.
8 Conclusions and Policy Suggestions: Summarizes key findings and provides actionable policy recommendations to ensure future sector competitiveness.
Keywords
New Economy Firms, India, Software Industry, Dummy Variable Regression, Chow Test, Employment, Economic Reforms, Financing, Capital Structure, IT-BPO Sector, Export Revenue, Infrastructure, NASSCOM, Economic Growth, IT Infrastructure.
Frequently Asked Questions
What is the core focus of this research?
The research examines the development and financing of the Indian software industry since its inception, specifically focusing on the impact of economic reforms on its growth, export potential, and employment generation capacity.
What are the primary thematic areas covered in the work?
The study covers the origin of software firms in India, government promotional policies, econometric drivers of industry growth, the relationship between exports and employment, and the specific challenges faced in raising financial capital.
What is the primary research goal or central hypothesis?
The primary goal is to assess whether post-1991 economic reforms significantly impacted the growth potential of the Indian software industry and to determine which financial sources are most utilized by new technology-based firms.
What scientific methods are applied in this report?
The author employs a mix of descriptive analysis and econometric techniques, including ordinary least squares (OLS) regression, Chow tests for structural breaks, and logarithmic models to calculate Compounded Annual Growth Rates (CAGR).
What does the main body address regarding financial issues?
The main body investigates the capital structure of software firms, revealing a heavy reliance on internal finance and bank loans, while highlighting significant constraints in accessing alternative capital markets.
Which keywords best characterize this study?
Key terms include New Economy Firms, India, Software Industry, Dummy Variable Regression, Employment, Economic Reforms, and Financing.
How do infrastructure bottlenecks affect the industry?
The report notes that cities like Bangalore and Pune have reached saturation points; better urban planning and public-private partnerships are required to overcome constraints related to transport, power, and high-quality educational support.
What are the implications for human capital?
The study highlights a skills gap in fresh graduates and suggests that government and industry should collaborate on specialized "finishing schools" to better align engineering and management education with industry needs.
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- Dr. Sanjay Tupe (Autor:in), 2012, Issues in Financing of New Economy Firms in India, München, GRIN Verlag, https://www.grin.com/document/288171
