An Analysis of Performance Efficiency and Determinants of Indian Software Exports During the Second Decade of Globalisation

Abstract

Technology-enabled innovations stimulate productivity growth, which is the key driver of long-term economic growth. The tectonic shift in economic activities particularly in service trade is mainly attributed to the advancement in technology. Against this backdrop, the present study is an attempt to analyse the evolution, performance, efficiency, and determinants of Indian software exports during 2000- 16. The study has analysed the role played by the government policies over the period for the development of the Indian Information Technology (IT) industry. It was found that policy initiatives of the government like fiscal incentives and better quality education, reinforced with the provision of physical infrastructure in export zones have played an indispensable role in the development of the industry. Besides, the state has become the largest domestic consumer of IT services. To testify the remarkable growth story of the industry the empirical analysis has accomplished. The Indian IT industry has grown at the rate of 17 percent compound annually from US$ 8.2 billion to US$ 167 billion during 2000-18. The exports are the main contributors to the lifeblood of the industry and the share has increased to 75 percent during the study period. The stocks of IT companies are darling for the investors and the industry has been among the sectors with the highest Foreign Direct Investment (FDI) inflows. Although very less, many Indian IT firms have started to invest in research and development activities. In comparison to multinational companies, the percentage of revenue spent on developing new techniques and processes and improving the earlier ones by Indian firms is very scant. Furthermore, to analyze the efficiency of Indian software firms, the study has used both deterministic as well as non-deterministic approaches to efficiency. In the case of the deterministic approach, the efficiency analysis is carried out through Data Envelopment Analysis (DEA) between 2000 and 2016 based on the availability of data. The functio